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.
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 Prepare: The schedule computing estimated lower of cost or market (LCM) inventory for October 31, 2018.
2.
To Mention: The factors that have caused the difference between computed inventory and the physical count.
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- EA5. EA5. LO 10.2Akira Company had the following transactions for the month.Chart showing Beginning Inventory of 150 units at $10 per unit, Purchase of March 31 of 160 units at $12 each, Purchase of October 15 of 130 units at $15 each, and ending inventory of 50 units at a cost of ? each.Calculate the ending inventory dollar value for the period for each of the following cost allocation methods, using periodic inventory updating. Provide your calculations. first-in, first-out (FIFO)last-in, first-out (LIFO)weighted average (AVG)arrow_forwardE8.12 (LO 3) (FIFO, LIFO, Average-Cost Inventory) Shania Twain Company was formed onDecember 1, 2019. The following information is available from Twain’s inventory records for Product BAP. Units Unit CostJanuary 1, 2020 (beginning inventory) 600 $ 8.00Purchases:January 5, 2020 1,200 9.00January 25, 2020 1,300 10.00February 16, 2020 800 11.00March 26, 2020 600 12.00 A physical inventory on March 31, 2020, shows 1,600 units on hand.InstructionsPrepare schedules to compute the ending inventory at March 31, 2020, under each of the following inventory methods.a. FIFO b. LIFO. c. Weighted-average (round unit costs to two decimal places)arrow_forwardEA6. LO 10.2 Akira Company had the following transactions for the month. Number of Units cost per unit Beginning inventory 150 $1,500 Purchased Mar. 31 160 1,920 Purchased Oct. 15 130 1,950 Total goods available for sale 440 5,370 Ending inventory 50 ? Calculate the gross margin for the period for each of the following cost allocation methods, using periodic inventory updating. Assume that all units were sold for $25 each. Provide your calculations. A first-in, first-out (FIFO). B. last-in, first-out (LIFO) C. weighted average (AVG)arrow_forward
- HW Q 4 Current Attempt in Progress At the end of Bridgeport Department Store’s fiscal year on November 30, 2020, these accounts appeared in its adjusted trial balance. Freight-In $ 7,500 Inventory 39,400 Purchases 578,500 Purchase Discounts 6,600 Purchase Returns and Allowances 2,900 Sales Revenue 1,044,700 Sales Returns and Allowances 17,000 Additional facts: 1. Merchandise inventory on November 30, 2020, is $ 53,800. 2. Bridgeport Department Store uses a periodic system. Prepare an income statement through gross profit for the year ended November 30, 2020. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) BRIDGEPORT DEPARTMENT STOREIncome Statement (Partial)choose the accounting period select an opening name for section one enter an income statement item $ enter a dollar amount…arrow_forward1. What is the company’s gross profit rate beginning January 1, 2021?* 17% 20% 21% 24% None of the choices 2. How much is the inventory fire loss?* 146,920 183,640 189,400 254,000 None of the choicesarrow_forwardMa4. Question 42. The cost of inventory that has been sold to customers is called: A. cost of goods sold, and it appears on the income statement. B.inventory, a current asset that appears on the balance sheet. C.inventory, a current asset that appears on the income statement. D.cost of goods sold, and it appears on the balance sheet. Question 43. ABC Company sold $120,000 of goods and accepted the customer's $120,000 10%, 1- year note in exchange. Assuming 10% approximates the market rate of return, how much interest would be recorded for the year ending December 31 if the sale was made on June 30? A.12,000 B. 3,000 C.0 D. 6,000 Question 44 Under the allowance method of recognizing uncollectible accounts, the entry to write off an uncollectible account A.increases the allowance for uncollectible accounts. B.has no effect on the allowance for uncollectible accounts. C.decreases net income. D. has no effect on net income.arrow_forward
- E8.8 (LO 2) (Purchases Recorded, Gross Method) Cruise Industries purchased $10,800 of merchandise on February 1, 2020, subject to a trade discount of 10% and with credit terms of 3/15, n/60. It returned $2,500 (gross price before trade or cash discount) on February 4. The invoice was paid on February 13. Instructions a. Assuming that Cruise uses the perpetual method for recording merchandise transactions, record the purchase, return, and payment using the gross method. b. Assuming that Cruise uses the periodic method for recording merchandise transactions, record the purchase, return, and payment using the gross method. c. At what amount would the purchase on February 1 be recorded if the net method were used?arrow_forwardE9.3B (L0 1) (LCNRV) Sunshine Company follows the practice of pricing its inventory at LCNRV, on an individual-item basis. Item No. Quantity Cost per Unit Cost to Replace Estimated Selling Price Cost of Completion and Disposal Normal Profi t A 1,200 $8.10 $8.00 $9.00 $0.35 $0.90 B 600 6.00 5.60 6.00 0.45 0.50 C 200 5.50 5.00 7.00 0.40 1.00 D 700 7.25 7.50 8.00 0.50 0.90 E 1,000 2.10 2.00 2.80 0.65 0.20 F 500 4.05 4.00 5.00 0.40 0.75 G 2,000 8.75 8.15 9.00 0.60 0.50 H 300 9.95 9.00 10.50 0.30 1.00 Instructions From the information above, determine the amount of Sunshine Company inventory using the LCNRV method. determine the amount of Sunshine Company inventory using the LCM method.arrow_forwardE9.23 (LO 6 ) (Analysis of Inventories) The financial statements of ConAgra Foods, Inc.'s 2017 annual report disclose the following information. (in millions) 2017 2016 2015 Year-end inventories $934.2 $1,044.1 $1,642.6 Fiscal Year 2017 2016 Net sales $7,826.9 $8,664.1 Cost of goods sold 5,484.8 6,234.9 Net income 648.0 (665.9) Instructions Compute ConAgra's (a) inventory turnover and (b) the average days to sell inventory for 2017 and 2016.arrow_forward
- Lower-of-cost-or-market inventory Data on the physical inventory of Katus Products Co. as of December 31 follows: Description Inventory Quantity Market Value per Unit (Net Realizable Value) A54 37 56 C77 24 178 F66 30 132 H83 21 545 K12 375 5 Q58 90 18 S36 8 235 V97 140 20 Y88 17 744 Quantity and cost data from the last purchases invoice of the year and the next-to-the-last purchases invoice are summarized as follows: Description Last Purchases Invoice Next-to-the-Last Purchases Invoice Quantity Purchased Unit Cost Quantity Purchased Unit Cost A54 30 60 40 58 C77 25 174 15 180 F66 20 130 15 128 H83 6 547 15 540 K12 500 6 500 7 Q58 75 25 80 26 S36 5 256 4 260 V97 100 17 115 16 Y88 10 750 8 740 Instructions Determine the inventory at cost and also at the lower of cost or market, using the first-in, first-out method. Record the appropriate unit costs on the inventory sheet, and complete the pricing of the inventory. When there are two different unit costs applicable to an item, proceed as follows: 1. Draw a line through the quantity, and insert the quantity and unit cost of the last purchase. 2. On the following line, insert the quantity and unit cost of the next-to-the-last purchase. 3. Total the cost and market columns and insert the lower of the two totals in the LCM column. The first item on the inventory sheet has been completed as an example. Inventory Sheet December 31 Description Unit Inventory Quantity Cost per Unit Market Value per Unit(Net Realizable Value) Total Cost Market LCM A54 37 30 60 56 1,800 1,680 7 58 56 406 392 2,206 2,072 2,072arrow_forward(Appendix 8.1) Inventory Write-Down Frost Companys inventory records tor the years 2019 and 2020 reveal the cost and market of the January 1, 2019, inventory to be 125,000. On December 31, 2019, the cost of inventory was 130,000, while the market value was only 128,000. The December 31, 2020, market value of inventory was 140,000, and the cost was only 135,000. Frost uses a periodic inventory system. Purchases for 2019 were 100,000 and for 2020 were 110,000. Required: 1. Assume the inventory that existed at the end of 2019 was sold in 2020. Prepare the journal entries at the end of 2019 and 2020 to record the lower of cost or net realizable value under the (a) allowance method and (b) direct method. 2. Prepare the cost of goods sold section of the income statement and show how the company would record the inventory on its balance sheet for 2019 and 2020 under the (a) allowance method and (b) direct method. 3. Next Level Refer to your answer for P8-3. How does the use of a periodic inventory system versus a perpetual inventory system affect the valuation of inventory and the amount reported as income?arrow_forward37.The Blueberry Company values its inventory by using the FIFO retail method.. The following information is available for the year 2020: Cost RetailBeg. invy 809,000 1,400,000Purchases 2,970,000 4,200,000Freight-in 40,000 Net markups 130,000Net markdowns 30,000Sales 4,000,000Sales discount 75,000At what amount would Blueberry Company report as its estimated cost of goods sold under the FIFO retail method? a. 1,134,000 b. 1,700,000 c. 2,680,000 d. 2,800,000arrow_forward
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