INTERMEDIATE ACCOUNTING (ACCT 3200B)
10th Edition
ISBN: 9781307660647
Author: SPICELAND
Publisher: MCG/CREATE
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Chapter 9, Problem 9.8DMP
Real World Case 9–8
Various inventory issues; Chapters 8 and 9; Fred’s Inc.
• LO9–1, LO9–5, LO9–6
Real World Financials
Fred’s Inc. operates general merchandise retail discount stores and full-service pharmacies in the Southeastern United States. Access the company’s 10-K for the fiscal year ended January 30, 2016. You can find the 10-K by using EDGAR at www.sec.gov. Answer the following questions.
Required:
1. What inventory methods does Fred’s use to value its inventory?
2. Which price index does the company use in applying the retail inventory method?
3. A company that uses LIFO is allowed to provide supplemental disclosures reporting the effect of using another inventory method rather than LIFO. Using the supplemental LIFO disclosures provided by Fred’s, determine the income effect of using LIFO versus another method for the current fiscal year.
4. Calculate the company’s inventory turnover ratio for the fiscal year ended January 30, 2016.
5. Assume that in the next fiscal year the company decides to switch to the average cost method. Describe the accounting treatment required for the switch.
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Pharoah Warehouse distributes hardback books to retail stores and extends credit terms of 2/10, n/30 to all of its customers. During
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15
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Journalize the transactions for the month of June for Pharoah Warehouse, using a perpetual inventory system. (If no entry is required,
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Do not indent manually. Record iournal entries in the order presented in the problem. List all debit entries before credit entries.)
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Cost of merchandise sold
Inventories:
Beginning of year
eBook
Inventory Turnover and Days' Sales in Inventory
Financial statement data for years ending December 31 for Amsterdam Company follow:
End of year
20Y4
20Y3
X
Inventory Turnover
20Y4
Show Me How
20Y3
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20Y4
$3,598,900
593,000
648,000
a. Determine the inventory turnover for 20Y4 and 20Y3. Round to one decimal place.
Print Item
20Y3
$3,015,630
b. Determine the days' sales in inventory for 20Y4 and 20Y3. Assume 365 days a year. Round interim calculations and final answers
to one decimal place.
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589,600
Days' Sales in Inventory
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days
c. Does the change in the inventory turnover and the days' sales in inventory from 20Y3 to 20Y4 indicate a favorable or an unfavorable
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20/Renolta traders purchased goods on 7th April, 2018 for RO 78,000 on credit under the payment terms 3/10, n/30 and paid cash on 15th April, 2018. How would you record this in the books of buyer under perpetual inventory system?
a.
Account payable RO 78,000 Dr / Merchandise inventory RO 2,340 Cr / Cash RO 75,660 Cr
b.
Account payable RO 78,000 Dr / Cash RO 78,000 Cr
c.
Cash RO 75,660 Dr / Merchandise inventory RO 2,340 Dr /Account payable RO 78,000 Cr
d.
Cash RO 78,000 Dr / Account payable RO 78,000 Cr
Chapter 9 Solutions
INTERMEDIATE ACCOUNTING (ACCT 3200B)
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 - 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 - 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 market LO91 [This is a variation...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Prob. 9.11ECh. 9 - Concepts; terminology LO91 through LO97 Listed...Ch. 9 - Prob. 9.1PCh. 9 - Prob. 9.3PCh. 9 - Prob. 9.8PCh. 9 - Prob. 9.1DMPCh. 9 - Prob. 9.3DMPCh. 9 - Prob. 9.4DMPCh. 9 - Prob. 9.5DMPCh. 9 - Prob. 9.6DMPCh. 9 - Prob. 9.7DMPCh. 9 - Real World Case 98 Various inventory issues;...Ch. 9 - Prob. 9.9DMPCh. 9 - Judgment Case 910 Inventory errors LO97 Some...Ch. 9 - Prob. 9.12DMPCh. 9 - Prob. 2CCTC
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