INTERMEDIATE ACCT VOL.2>CUSTOM<
9th Edition
ISBN: 9781307165067
Author: SPICELAND
Publisher: MCG/CREATE
expand_more
expand_more
format_list_bulleted
Question
Chapter 9, Problem 9.5P
1.
To determine
Gross Profit Method: Under this method, the beginning inventory is added to the net purchases during the period which results in the goods available for sale. Then, the estimated cost of goods sold is deducted from the goods available for sale to estimate the ending inventory.
To Calculate: The estimated cost of each of the toppings lost in the fire using the gross profit method.
2.
To determine
To Mention: The factors that cause the estimates to be overstated or understated.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Hobby Losses (LO 3.12)
Lew is a practicing CPA who decides to raise bonsai as a business. Lew engages in the activity and has the following revenue and expenses:
Sales
$ 5,000
Depreciation on greenhouse
10,000
Fertilizer, soil, pots
1,500
If an amount is zero, enter "0".
b. If the activity is deemed to be a regular business, what is the amount of Lew's loss from the activity?$fill in the blank 9a0cfdf68fac035_1
c. If the activity is deemed to be a hobby, what is the amount of Lew's expenses (if any) from the activity that may be deducted?$fill in the blank 12b81b026feafdb_1
Problem 7-34 (LO. 3, 4)
Heather owns a two-story building. The building is used 40% for business use and 60% for personal use. During 2020, a fire caused major damage to the building and its contents. Heather purchased the building for $800,000 and has taken depreciation of $100,000 on the business portion. At the time of the fire, the building had a fair market value of $900,000. Immediately after the fire, the fair market value was $200,000. The insurance recovery on the building was $600,000. The contents of the building were insured for any loss at fair market value. The business assets had an adjusted basis of $220,000 and a fair market value of $175,000. These assets were totally destroyed. The personal use assets had an adjusted basis of $50,000 and a fair market value of $65,000. These assets were also totally destroyed.
a. Determine the business and personal gain or loss in regard to the building and its contents.
Total
BusinessPortion
PersonalPortion…
A6
Most insurance companies will replace a vehicle any time an estimated repair exceeds 80% of the "blue -book" value of the vehicle. Michelle's insurance company paid $8,600 for repairs on her car after an accident. What can be concluded about the blue -book value of the car?
Chapter 9 Solutions
INTERMEDIATE ACCT VOL.2>CUSTOM<
Ch. 9 - Explain the (a) lower of cost or net realizable...Ch. 9 - What are the various levels of aggregation to...Ch. 9 - Describe the alternative approaches for recording...Ch. 9 - Explain the gross profit method of estimating...Ch. 9 - The Rider Company uses the gross profit method to...Ch. 9 - Explain the retail inventory method of estimating...Ch. 9 - Both the gross profit method and the retail...Ch. 9 - Define each of the following retail terms: initial...Ch. 9 - Explain how to estimate the average cost of...Ch. 9 - Prob. 9.10Q
Ch. 9 - Explain the LIFO retail inventory method.Ch. 9 - Discuss the treatment of freight-in, net markups,...Ch. 9 - Explain the difference between the retail...Ch. 9 - Prob. 9.14QCh. 9 - Prob. 9.15QCh. 9 - Explain the accounting treatment of material...Ch. 9 - It is discovered in 2018 that ending inventory in...Ch. 9 - Identify any differences between U.S. GAAP and...Ch. 9 - (Based on Appendix 9) Define purchase commitments....Ch. 9 - (Based on Appendix 9) Explain how purchase...Ch. 9 - Lower of cost or net realizable value LO91 Ross...Ch. 9 - Lower of cost or net realizable value LO91 SLR...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Prob. 9.5BECh. 9 - Gross profit method; solving for unknown LO92...Ch. 9 - Retail inventory method; average cost LO93 Kiddie...Ch. 9 - Retail inventory method; LIFO LO93 Refer to the...Ch. 9 - Conventional retail method LO94 Refer to the...Ch. 9 - Conventional retail method LO94 Roberson...Ch. 9 - Dollar-value LIFO retail LO95 On January 1, 2018,...Ch. 9 - Dollar-value LIFO retail LO95 This exercise is a...Ch. 9 - Change i n inventory costing methods LO96 In...Ch. 9 - Change in inventory costing methods LO96 In 2018,...Ch. 9 - Inventory error LO97 In 2018, Winslow...Ch. 9 - Inventory error LO97 Refer to the situation...Ch. 9 - Lower of cost or net realizable value LO91 Herman...Ch. 9 - Lower of cost or net realizable value LO91 The...Ch. 9 - Lower of cost or net realizable value LO91 Tatum...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Prob. 9.8ECh. 9 - Prob. 9.9ECh. 9 - Prob. 9.10ECh. 9 - Gross profit method LO92 Royal Gorge Company uses...Ch. 9 - Prob. 9.12ECh. 9 - Retail inventory method; average cost LO93 San...Ch. 9 - Prob. 9.14ECh. 9 - Retail inventory method; LIFO LO93 Crosby Company...Ch. 9 - Prob. 9.16ECh. 9 - Conventional retail method; employee discounts ...Ch. 9 - Retail inventory method; solving for unknowns ...Ch. 9 - Dollar-value LIFO retail LO95 On January 1, 2018,...Ch. 9 - Prob. 9.20ECh. 9 - Dollar-value LIFO retail LO95 Lance-Hefner...Ch. 9 - Prob. 9.22ECh. 9 - Change in inventory costing methods LO96 In 2018,...Ch. 9 - Prob. 9.24ECh. 9 - Error correction; inventory error LO97 During...Ch. 9 - Prob. 9.26ECh. 9 - Inventory error LO97 In 2018, the internal...Ch. 9 - Inventory errors LO97 In 2018, the controller of...Ch. 9 - Concepts; terminology LO91 through LO97 Listed...Ch. 9 - Prob. 9.30ECh. 9 - Prob. 9.31ECh. 9 - Lower of cost or net realizable value LO91 Decker...Ch. 9 - Prob. 9.2PCh. 9 - Lower of cost or market LO91 Forester Company has...Ch. 9 - Prob. 9.4PCh. 9 - Prob. 9.5PCh. 9 - Prob. 9.6PCh. 9 - Retail inventory method; conventional and LIFO ...Ch. 9 - Prob. 9.8PCh. 9 - Prob. 9.9PCh. 9 - Dollar-value LIFO retail method LO95 [This is a...Ch. 9 - Dollar-value LIFO retail LO95 On January 1, 2018,...Ch. 9 - Retail inventory method; various applications ...Ch. 9 - Retail inventory method; various applications ...Ch. 9 - Prob. 9.14PCh. 9 - Inventory errors LO97 You have been hired as the...Ch. 9 - Inventory errors LO97 The December 31, 2018,...Ch. 9 - Integrating problem; Chapters 8 and 9; inventory...Ch. 9 - Purchase commitments Appendix In November 2018,...Ch. 9 - Judgment Case 91 Inventoriable costs; lower of...Ch. 9 - Integrating Case 93 FIFO and lower of cost or net...Ch. 9 - Prob. 9.4BYPCh. 9 - Prob. 9.5BYPCh. 9 - Prob. 9.6BYPCh. 9 - Prob. 9.7BYPCh. 9 - Real World Case 98 Various inventory issues;...Ch. 9 - Prob. 9.9BYPCh. 9 - Judgment Case 910 Inventory errors LO97 Some...Ch. 9 - Ethics Case 911 Overstatement of ending inventory ...Ch. 9 - Analysis Case 912 Purchase commitments Appendix...Ch. 9 - Continuing Cases Target Case LO93, LO94, LO95...Ch. 9 - Prob. 1CCIFRS
Knowledge Booster
Similar questions
- Problem 11-53 (c) (LO. 3, 8) Several years ago, Sabrina acquired an apartment building that currently generates a loss of $87,000. She has AGI of $340,000 before considering the loss. Sabrina is not an active participant in the activity. Complete the paragraph below explaining what effect the loss will have on her AGI. The activity is activity, and Sabrina is not an active participant. Therefore, deduction is allowed under the real estate rental exception. The $87,000 loss is under the rules, and Sabrina's AGI is $fill in the blank 5.arrow_forwardProblem 8-15 Intangibles (LO 8.6) Annie develops a successful tax practice. She sells the practice to her friend Carol for $54,000 and moves to Florida to retire. The tax practice has no assets except intangible benefits such as the goodwill and going-concern value Annie has developed over the years. How should Carol treat the $54,000 cost of the tax practice she has purchased? Because the purchased goodwill and going-concern value qualify as a section 197 intangible assets, the $54,000 is currently expensed .arrow_forwardBill Buckely has split-limit 50/100/20 automobile liability insurance on his 2012 Subaru. Driving home from work in a snowstorm, he hit a Mercedes, slid into a guardrail, and knocked down a telephone pole. Damages to the Mercedes, the guardrail, and the telephone pole were $15,557, $3,185 and $7,600 respectively. How much will Bill's insurance company pay? How much will Bill be required to pay directly? Bill's insurance company will pay? The amount Bill will be required to pay directly is?arrow_forward
- 7. Lester purchased 53,125.75Php worth of goods on March 7 from Elmer’s Enterprise at 12/6 8/10n/40. If he pays on March 17, how much will Lester pay?a. 53,125.75Phpb. 48,875.69Phpc. 46,750.66Phpd. Cannot be determinede. None of the abovearrow_forwardLO.1 Anne sold her home for 290,000 in 2019. Selling expenses were 17,400. She purchased it in 2013 for 200,000. During the period of ownership, Anne did the following. Deducted 50,500 office-in-home expenses, which included 4,500 in depreciation. (Refer to text Section 9-6a). Deducted a casualty loss in 2015 for residential trees destroyed by a hurricane (her county was declared a Federal disaster area). The total loss was 19,000 (after the 100 floor and the 10%-of-AGI floor), and Annes insurance company reimbursed her for 13,500. (Refer to text Section 7-3.) Raid street paving assessment of 7,000 and added sidewalks for 8,000. Installed an elevator for medical reasons. The total cost was 20,000, and Anne deducted 13,000 as medical expenses. (Refer to text Section 10-lb.) What is Annes realized gain?arrow_forwardProblem 13-44 (LO. 1) Kareem bought a rental house in March 2015 for $300,000, of which $50,000 is allocated to the land and $250,000 to the building. Early in 2017, he had a tennis court built in the backyard at a cost of $7,500. Kareem has deducted $30,900 for depreciation on the house and $1,300 for depreciation on the court. In January 2020, he sells the house and tennis court for $330,000 cash. a. What is the adjusted basis of the rental house and land at the time of the sale?$fill in the blank What is the adjusted basis of the tennis court at the time of the sale?$fill in the blank What is Kareem's realized gain or loss?Kareem's realized on the sale is $fill in the blank. b. If an original mortgage of $80,000 is still outstanding and the buyer assumes the mortgage in addition to the cash payment, what is Kareem's realized gain or loss?Kareem's realized is $fill in the blank . c. If the buyer takes the property subject to the $80,000 mortgage rather than assuming…arrow_forward
- Problem 13-84 (LO. 8, 9) Karl purchased his residence on January 2, 2019, for $260,000, after having lived in it during 2018 as a tenant under a lease with an option to buy clause. On August 1, 2020, Karl sells the residence for $315,000. On June 13, 2020, Karl purchases a new residence for $367,000. If an amount is zero, enter "0". a. What is Karl's recognized gain? His basis for the new residence?Karl's recognized gain is $fill in the blank aa8a5403c02a012_1, and his basis for the new residence is $fill in the blank aa8a5403c02a012_2. b. Assume that Karl purchased his original residence on January 2, 2018 (rather than January 2, 2019). What is Karl's recognized gain? His basis for the new residence? Karl's recognized gain is $fill in the blank f8cfe3ffcff0ffc_1, and his basis for the new residence is $fill in the blank f8cfe3ffcff0ffc_2. c. In part (a), what could Karl do to minimize his recognized gain?To minimize his recognized gain, he can continue to…arrow_forwardProblem 10-25 (LO. 2) For calendar year 2020, Jean was a self-employed consultant with no employees. She had $80,000 of net profit from consulting and paid $7,000 in medical insurance premiums on her policy covering 2020. How much of these premiums may Jean deduct as a deduction for AGI? As an itemized deduction? If an amount is zero, enter "0". Self-employed persons can deduct fill in the blank 1 % of their medical insurance premiums as a deduction for AGI in 2020. Thus, Jean may deduct $fill in the blank 2 as a deduction AGI and she may deduct $fill in the blank 4 as an itemized deduction (subject to the AGI floor).arrow_forwardProblem 13-85 (LO. 8) Wesley, who is single, listed his personal residence with a real estate agent on March 3, 2020, at a price of $390,000. He rejected several offers in the $350,000 range during the summer. Finally, on August 16, 2020, he and the purchaser signed a contract to sell for $363,000. The sale (i.e., closing) took place on September 7, 2020. The closing statement showed the following disbursements: Real estate agent's commission $21,780 Appraisal fee 600 Exterminator's certificate 300 Recording fees 800 Mortgage to First Bank 305,000 Cash to seller 34,520 Wesley's adjusted basis for the house is $200,000. He owned and occupied the house for seven years. On October 1, 2020, Wesley purchases another residence for $325,000. If an amount is zero, enter "0". a. Calculate Wesley's recognized gain on the sale.$fill in the blank 89a3d703a067018_1 b. What is Wesley's adjusted basis for the new residence?$fill in the blank…arrow_forward
- Effect of depreciation on net income Tuttle Construction Co. specializes in building replicas of historic houses. Tim Newman, president of Tuttle Construction, is considering the purchase of various items of equipment on July 1, 2014, for 400,000. The equipment would have a useful life of five years and no residual value. In the past, all equipment has been leased. For tax purposes, Tim is considering depreciating the equipment by the straight-line method. He discussed the matter with his CPA and learned that, although the straight-line method could be elected, it was to his advantage to use the Modified Accelerated Cost Recovery System (MACRS) for tax purposes. He asked for your advice as to which method to use for tax purposes. 1. Compute depreciation for each of the years (2014, 2015, 2016, 2017, 2018, and 2019) of useful life by (a) the straight-line method and (b) MACRS. In using the straight-line method, one-half years depreciation should be computed for 2014 and 2019. Use the MACRS rates presented in Exhibit 9. 2. Assuming that income before depreciation and income tax is estimated to be 750,000 uniformly per year and that the income tax rate is 40%, compute the net income for each of the years 2014, 2015, 2016, 2017, 2018, and 2019 if (a) the straight-line method is used and (b) MACRS is used. 3. What factors would you present for Tims consideration in the selection of a depreciation method?arrow_forward64.LO.10 Helen Derby borrowed $150,000 to acquire a parcel of land to be held for investment purposes. During the current year, she reported AGI of $90,000 and paid interest of $12,000 on the loan. Other items related to Helen’s investments include the following: Interest and annuity income$11,000 Long-term capital gain on sale of stock3,500 Real estate tax on the investment land800 a.Determine Helen’s investment interest deduction for the current year. b.Discuss the treatment of the portion of Helen’s investment interest that is disallowed for the current year. c.Complete Helen’s Form 4952 for the current year. For this purpose, assume that she chooses not to include the long-term capital gain as investment income. Her Social Security number is 123-45-6789.arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
- Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
- Accounting (Text Only)AccountingISBN:9781285743615Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Individual Income Taxes
Accounting
ISBN:9780357109731
Author:Hoffman
Publisher:CENGAGE LEARNING - CONSIGNMENT
Accounting (Text Only)
Accounting
ISBN:9781285743615
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning