Concept explainers
1.
Retail inventory method: It takes into account all the retail amounts that is, the current selling prices. Under this method, the goods available for sale, at retail is deducted from the sales, at retail to determine the ending inventory, at retail.
Average cost: It is a method of determining the cost-to retail percentage for all the goods available for sale.
To Calculate: The amount of ending inventory and cost of goods sold.
2.
Conventional Retail Method: Conventional retail method refers to the estimation of the lower of average cost or market by eliminating the markdowns from the calculation of the cost-to-retail percentage.
In this case, the cost-to-retail percentage will be determined by dividing the goods available for sale at cost by the goods available for at retail (excluding markdowns). Thus, the conventional retail method will always result in lower estimation of ending inventory when the markdowns exist.
To Calculate: The amount of ending inventory and cost of goods sold.
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Chapter 9 Solutions
INTERMEDIATE ACCOUNTING RMU 9TH EDITION
- Problem 9-9 (Algo) Retail method-average cost and conventional [LO9-3, 9-4] Smith - Kline Company maintains inventory records at selling prices as well as at cost. For 2024, the records indicate the following data: ($ in thousands) Cost Retail Beginning inventory $ 84 $ 129 Purchases 675 1,010 Freight - in on purchases 34 Purchase returns 2 3 Net markups 5 Net markdowns 9 Net sales 920 Problem 9-9 (Algo) Part 1 Required: 1. Use the retail method to approximate cost of ending inventory valued under average cost method. Note: Enter your answer in thousands including 2 decimal places, i. e. 12, 550 would be 12.55.arrow_forwardProblem 6-2AA (Static) Periodic: Alternative cost flows LO P3 [The following information applies to the questions displayed below.] Warnerwoods Company uses a periodic inventory system. It entered into the following purchases and sales transactions for March Date March 1 March S March 9 March 18 March 25 March 29 Activities Beginning inventory Purchase Sales Purchase Purchase Sales Totals Sales Less: Cost of goods sold Gross profit $ $ FIFO For specific identification, units sold include 80 units from beginning inventory, 340 units from the March 5 purchase, 40 units from the March 18 purchase, and 120 units from the March 25 purchase. 50,900 $ Units Acquired at Cost 100 units@ $50 per unit 400 units @ $55 per unit Problem 6-2AA (Static) Part 4 4. Compute gross profit earned by the company for each of the four costing methods. Note: Round your average cost per unit to 2 decimal places and final answers to nearest whole dollar. 50,900 $ 120 units@ $60 per unit 200 units@ $62 per unit…arrow_forwardem #1 of 22 Morgan Industries is comparing and contrasting its ending inventory value in terms of the three common inventory costing methods in order to help management de the met use. The company determines three values, which are $96,000, $100.000, and $105,000. 1 management determines that $100,000 the most appropriate value for sending cost method has it most likely chosen? t a FIFO Inventory cost method Weighted average inventory cost method Middle of cost or market method d. LIFO inventory cost method Tim Done pats med to ventaryarrow_forward
- Required information Problem 5-2AA (Static) Periodic: Alternative cost flows LO P3 [The following information applies to the questions displayed below.] Warnerwoods Company uses a periodic inventory system. It entered into the following purchases and sales transactions for March. Date March 1 March 5 March 9 March 18 March 25 March 29 Activities Beginning inventory Purchase Sales Purchase Purchase Sales Totals Units Acquired at Cost @$50 per unit @ $55 per unit Problem 5-2AA (Static) Part 3 100 units 400 units 120 units 200 units 820 units @$60 per unit @ $62 per unit Units Sold at Retail 420 units @ $85 per unit 160 units @ $95 per unit 580 units For specific identification, units sold include 80 units from beginning inventory, 340 units from the March 5 purchase, 40 units from the March 18 purchase, and 120 units from the March 25 purchase. 3. Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification. (Round your…arrow_forwardLower-of-Cost-or-Market Method On the basis of the data shown below: Inventory Cost per Market Value per Unit Item Quantity Unit (Net Realizable Value) Raven 10 1,700 $163 $159 Dove 23 9,200 24 30 Determine the value of the inventory at the lower of cost or market. Apply lower of cost or market to each inventory item, as shown in Exhibit 9. 1:01 PM 10/23/2020arrow_forwardBeginning inventory Purchases Freight on purchases Markups Markup cancellations Abnormal shortage Markdowns Markdown cancellations Employee discounts Sales revenue Sales returns Normal shortage Purchase returns Cost $457,000 1,606,000 78,400 17,300 22,840 Compute ending inventory by the conventional retail inventory method. Round percentages to 2 decimals. Retail $730,000 3,114,000 174,000 137,200 28,480 93,720 12,050 6,438 3,505,000 104,000 17,400 42,470arrow_forward
- Required information Problem 5-1A (Algo) Perpetual: Alternative cost flows LO P3 [The following information applies to the questions displayed below.] Warnerwoods Company uses a perpetual inventory system. It entered into the following purchases and sales transactions for March. Date March 1 March 5 March 9 March 18. March 25 March 29 Gross Margin Sales Less: Cost of goods sold Gross profit Beginning inventory Purchase Sales Purchase Purchase. Activities Sales Totals $ $ FIFO Problem 5-1A (Algo) Part 4 4. Compute gross profit earned by the company for each of the four costing methods. For specific identification, units sold include 120 units from beginning inventory, 250 units from the March 5 purchase, 100 units from the March 18 purchase, and 140 units from the March 25 purchase. (Round weighted average cost per unit to two decimals and final answers to nearest whole dollar.) 40,570 $ 25.220 15,350 $ Units Acquired at Cost 210 units @ $53.20 per unit 280 units $58.20 per unit LIFO…arrow_forwardPA4. LO 10.3 Calculate the cost of goods sold dollar value for A74 Company for the sale on March 11, considering the following transactions under three different cost allocation methods and using perpetual inventory updating. Provide calculations for (a) first-in, first-out (FIFO); (b) last-in, first-out (LIFO); and (c) weighted average (AVG). Number of Units Unit Cost Beginning inventory Mar. 1 Purchased Mar. 8 Sold Mar. 11 for $120 per unit 110 140 $87 89 95 Solution А. Number of Units Dollar per Unit Value Cost of goods sold В. Number of Units Dollar per Unit Value Cost of goods sold C. Number of Units Dollar per Unit Value Cost of goods sold PA5. LO 10.3 Use the first-in, first-out (FIFO) cost allocation method, with perpetual inventory updating, to calculate (a) sales revenue, (b) cost of goods sold, and c) gross margin for A75 Company, considering the following transactions. Number Unit Cost of Units Beginning inventory Purchased Mar. 2 Sold Mar, 31 for $75 per unit 105 150 88…arrow_forwardCh 10b, HW#3 Use the first-in, first-out (FIFO) cost allocation method, with perpetual inventory updating, to calculate (a) sales revenue, (b) cost of goods sold, and (c) gross margin for A75 Company, considering the following transactions. Number Unit of Units Cost Beginning Inventory 120 $46 Purchased Mar. 2 165 48 Sold Mar. 31 for $80 per unit 83 (a) Sales Revenue (b) Cost of Goods Sold (c) Gross Margin %24 %24arrow_forward
- Beg Inv @ cost $11,160 Net Additional markups $600 Sales $94,056 Purchases @ retail $92,400 Freight-in $840 Beg Inv @ retail $18,000 Purchases @ cost $54,600 Net markdowns $1,144 11. Lets assume they employ the LIFO retail method at time of stable prices. What is the ending inventory at retail if using the LIFO retail? Thank you Brendaarrow_forwardProblem 9 - 10 (Algo) Dollar - value LIFO retail method [LO9 - 5] Smith - Kline Company maintains inventory records at selling prices as well as at cost. For 2024, the records indicate the following data: ($ in 000s) Cost Retail Beginning inventory $ 112 $ 160 Purchases 812 1,067 Freight-in on purchases 37 Purchase returns 13 Net markups 5 Net markdowns 9 Net sales 923 Required: Assuming the price level increased from 1.00 at January 1 to 1.45 at December 31, 2024, use the dollar - value LIFO retail method to approximate cost of ending inventory and cost of goods sold. Note: Round your intermediate and final answers to the nearest whole dollar. Enter your answers in thousands.arrow_forwardInventory Write-Down Brown Company has the following information available regarding each unit of its inventory: Selling price $5,200 Costs of completion 250 Current replacement cost 5,000 Normal profit margin 2,400 a. Determine the net realizable value under the LCNRV rule. b. Determine the amount that should be used as the market value under the LCM rule.arrow_forward
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