Concept explainers
1.
Method of Inventory
Inventory refers to the current assets that a company expects to sell during the normal course of business operations, the goods that are under process to be completed for future sale, or currently used for producing goods to be sold in the market. Inventory is valued under three methods:
FIFO
Under this inventory method, the units that are purchased first, are sold first. Thus, it starts from the selling of the beginning inventory, followed by the units purchased in a chronological order of their purchases took place during a particular period.
LIFO
Under this inventory method, the units that are purchased last, are sold first. Thus, it starts from the selling of the units recently purchased and ending with the beginning inventory.
Average cost method
Under this method, the cost of the goods available for sale is divided by the number of units available for sale during a particular period.
To Prepare: for Mr. KM, the disclosure note that will be included in the 2018 financial statements.
2.
To Explain: as to why the cumulative effect of the change on prior years’ income is not determinable.
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Chapter 9 Solutions
INTERMEDIATE ACCOUNTING (LCPO)
- Question 4 of 8 Current Attempt in Progress Marigold Company uses the LCM method, on an individual-item basis, in pricing its inventory items because it uses LIFO to value its inventory. The inventory at December 31, 2025, consists of products D, E, F, G, H, and I. Relevant per-unit data for these products appear below. Estimated selling price Cost Replacement cost Estimated selling expense Normal profit Item D Item E Item F Item C $ $ Item D $ $252 158 252 63 42 Item E $231 168 151 63 42 Item F $200 168 147 63 42 Item G $189 168 63 53 42 Item H $231 105 Using the LCM rule, determine the proper unit value for balance sheet reporting purposes at December 31, 2025, for each of the inventory items above. 147 63 42 Item I $189 76 63 63 42arrow_forwardQuestion 41 of 50 - / 1 View Policies Current Attempt in Progress The following information was available from the inventory records of Marigold Corp. for January: Units Unit Cost Total Cost Balance at January 1 9200 $9.73 $89516 Purchases: January 6 5800 10.33 59914 January 26 7900 10.75 84925 Sales January 7 (7700 ) January 31 (10900 ) Balance at January 31 4300 Assuming that Marigold does not maintain perpetual inventory records, what should be the inventory at January 31, using the weighted-average inventory method, rounded to the nearest dollar? O $45298. O $44006. O $44105. O $44598. Save for Later Attempts: 0 of 2 used Submit Answerarrow_forwardQuestion 12 of 13 -/1 E View Policies Current Attempt in Progress Tamarisk Hardware reported cost of goods sold as follows. 2021 2022 Beginning inventory $ 23,000 $ 34,000 Cost of goods purchased 150,000 182,500 Cost of goods available for sale 173,000 216,500 Less: Ending inventory 34,000 37,500 Cost of goods sold $139,000 $179,000 Tamarisk made two errors: (1) 2021 ending inventory was overstated by $3,550, and (2) 2022 ending inventory was understated by $6,600. Compute the correct cost of goods sold for each year. 2021 2022 Cost of goods sold 2$ eTextbook and Media Save for Later Attempts: unlimited Submit Answerarrow_forward
- 19:10 Question 3 You are provided with the following extracts and information taken from the books of Leopard Traders for the month of June 2021. Leopard Traders sells clothing that they buy from various suppliers. Leopard Traders uses the perpetual inventory system. You are provided with an incomplete Creditors Control for the month of June 2021. The 1. balance at the beginning of the month is correct. CREDITORS CONTROL B5 DATE DETAILS FOL AMOUNT DATE DETAILS FOL AMOUNT 30 June Sundry returns CAJ 2 800 1 JUNE Balance b/d 55 130 2021 2021 Bank СВР 24 000 Sundry CJ 13 000 purchases Settlement GJ 250 discount received The following errors/omissions were noted: A. The total of the creditors journal has been overcast by R600. B. No entry has been made for inventory bought on credit from Gemsbok Suppliers for R2 400 (including VAT) less 10% trading discount. C. An original credit note received from Giraffe Dealers for R435 was entered incorrectly in the Creditors Allowances journal as R345…arrow_forwardQuestion 13 of 13 > -/1 View Policies Current Attempt in Progress Blue Spruce Corp. Inc. uses the lower-of-cost-or-net realizable value basis for its inventory. The following data are available at December 31. Net Realizable Item Units Unit Cost Value Cameras: Minolta 6. $177 $157 Canon 10 143 179 Light meters: Vivitar 13 137 112 Kodak 17 120 140 What amount should be reported on Blue Spruce Corp's financial statements, assuming the lower-of-cost-or-net realizable value rule is applied? The ending inventory $ eTextbook and Media Save for Later Attempts: unlimited Submit Answerarrow_forwardRequired information Problem 11-4A Warranty expense and liability estimation LO P4 [The following information applies to the questions displayed below.] On October 29, 2016, Lobo Co. began operations by purchasing razors for resale. Lobo uses the perpetual inventory method. The razors have a 90-day warranty that requires the company to replace any nonworking razor. When a razor is returned, the company discards it and mails a new one from Merchandise Inventory to the customer. The company's cost per new razor is $16 and its retail selling price is $90 in both 2016 and 2017. The manufacturer has advised the company to expect warranty costs to equal 8% of dollar sales. The following transactions and events occurred. 2016 Nov. 11 Sold 60 razors for $5,400 cash. 30 Recognized warranty expense related to November sales with an adjusting entry. 9 Replaced 12 razors that were returned under the warranty. 16 Sold 180 razors for $16, 200 cash. 29 Replaced 24 razors that were returned under the…arrow_forward
- Required information Problem 11-4A Warranty expense and liability estimation LO P4 [The following information applies to the questions displayed below.] On October 29, 2016, Lobo Co. began operations by purchasing razors for resale. Lobo uses the perpetual inventory method. The razors have a 90-day warranty that requires the company to replace any nonworking razor. When a razor is returned, the company discards it and mails a new one from Merchandise Inventory to the customer. The company's cost per new razor is $16 and its retail selling price is $90 in both 2016 and 2017. The manufacturer has advised the company to expect warranty costs to equal 8% of dollar sales. The following transactions and events occurred. 2016 Nov. 11 Sold 60 razors for $5,400 cash. 30 Recognized warranty expense related to November sales with an adjusting entry. 9 Replaced 12 razors that were returned under the warranty. 16 Sold 180 razors for $16, 200 cash. 29 Replaced 24 razors that were returned under the…arrow_forwardRequired information Problem 11-4A Warranty expense and liability estimation LO P4 [The following information applies to the questions displayed below.] On October 29, 2016, Lobo Co. began operations by purchasing razors for resale. Lobo uses the perpetual inventory method. The razors have a 90-day warranty that requires the company to replace any nonworking razor. When a razor is returned, the company discards it and mails a new one from Merchandise Inventory to the customer. The company's cost per new razor is $16 and its retail selling price is $90 in both 2016 and 2017. The manufacturer has advised the company to expect warranty costs to equal 8% of dollar sales. The following transactions and events occurred. 2016 Nov. 11 Sold 60 razors for $5,400o cash. 30 Recognized warranty expense related to November sales with an adjusting entry. Dec. 9 Replaced 12 razors that were returned under the warranty. 16 Sold 180 razors for $16, 200 cash. 29 Replaced 24 razors that were returned…arrow_forwardP 8-14 Dollar-value LIFO LO8-8 Kingston Company uses the dollar-value LIFO method of computing inventory. An external price index is used to convert ending inventory to base year. The company began operations on January 1, 2018, with an inventory of $150,000. Year-end inventories at year-end costs and cost indexes for its one inventory pool were as follows: Year Ended December 31 2018 2019 2020 2021 Ending Inventory at Year-End Costs $200,000 245,700 235,980 228,800 Cost Index (Relative to Base Year) 1.08 1.17 1.14 1.10 Required: Calculate inventory amounts at the end of each year.arrow_forward
- PROBLEM 15 Examination of the records of Hopper Company for the year ended December 31, 2021 revealed the following: • Inventory at January 1, 2021 was overstated by P71,000. • Inventory at December 31, 2021 was understated by P96,000. • During 2021, Hopper received a P60,000 cash advance from a customer for merchandise to be manufactured and shipped during 2022. The P60,000 was credited to sales revenue. • Profit (before adjustments) reported on the 2021 profit or loss was P658,000. Explain the right profit for 2021arrow_forwardQuestion 1 of 6View PoliciesCurrent Attempt in ProgressThe following are selected transactions of Kingbird Company. Kingbird sells in large quantities to other companies and also sells itsproduct in a small retail outlet.March 131531-/1 = :Sold merchandise on account to Dodson Company for $10,600, terms 2/10, n/30.Dodson Company returned merchandise with a sales price of $600 to Kingbird.Kingbird collected the amount due from Dodson Company from the March 1 sale.Kingbird sold merchandise for $600 in its retail outlet. The customer used his Kingbird credit card.Kingbird added 2.0% monthly interest to the customer's credit card balance.Prepare journal entries for the transactions above. (Ignore cost of goods sold entries and explanations.) (Credit account titles areautomatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)arrow_forwardwork Question 4 of 10 View Policies < Current Attempt in Progress Ivanhoe Solutions Company just began business and made the following four inventory purchases in June: June 1 162 units $972 June 10 216 units 1512 June 15 216 units 1728 June 28 162 units 1458 $5670 -/10 E The company uses a periodic inventory system. A physical count of merchandise inventory on June 30 reveals that there are 216 on hand, Using the LIFO inventory method, the value of the ending inventory on June 30 is O $1350. O $1890. O $1296. O $1944.arrow_forward
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