College Accounting (Book Only): A Career Approach
13th Edition
ISBN: 9781337280570
Author: Scott, Cathy J.
Publisher: South-Western College Pub
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Textbook Question
Chapter C, Problem 3P
Use the information presented in Problem C-1 to solve this problem.
Required
Find the cost of the ending inventory by the last-in, first-out method.
PROBLEM C-1 Bean Nursery sells bark to its customers at retail. Bean buys bark from a plywood mill in bulk and transports the bark in its own trucks. Information relating to the beginning inventory and purchases of bark is as follows:
Required
Find the cost of 1,200 cubic yards in the ending inventory by the weighted-average-cost method. Carry average cost per cubic yard to four decimals.
Check Figure
Cost of ending inventory, $480
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Wilkens Company uses the LIFO method for inventory costing. In an effort to lower net income, company president Mike Wilkens tells the plant accountant to take the unusual step of recommending to the purchasing department a large purchase of inventory at year-end. The price of the item to be purchased has nearly doubled during the year, and the item represents a major portion of inventory value.
Instructions
Answer the following questions.
a. Identify the major stakeholders. If the plant accountant recommends the purchase, what are the consequences?
b. If Wilkens Company were using the FIFO method of inventory costing, would Mike Wilkens give the same order? Why or why not?
A home improvement store, like Lowe’s, carries the following items:
Inventory Items
Quantity
Unit Cost
Unit NRV
Hammers
100
$6.80
$7.30
Saws
50
9.80
8.80
Screwdrivers
130
1.80
2.40
Drills
40
24.80
21.60
One-gallon paint cans
160
5.30
4.80
Paintbrushes
180
5.80
6.30
Required:
1. Compute the total cost of inventory.2. Determine whether each inventory item would be reported at cost or net realizable value, and then place that unit amount in the “Lower of Cost and NRV per unit” column. Multiply the quantity of each inventory item by the appropriate cost or NRV unit amount and place the total in the “Total” column.3. Record any necessary adjusting entry to write down inventory from cost to net realizable value.4. Determine the financial statement effects of using lower of cost and net realizable value to report inventory.
the next two questions use the following facts. The Corner Frame Shop wants to know theeffect of different inventory costing methods on its financial statements. Inventory and purchases data for June are:Units Unit Cost Total CostJun 1 Beginning inventory 2,500 $11.00 $27,5004 Purchase 1,800 $11.80 21,2409 Sale (1,900)Q6-48. If The Corner Frame Shop uses the FIFO method, the cost of the ending inventory will bea. $21,200.b. $20,900.c. $21,240.d. $27,840.
Chapter C Solutions
College Accounting (Book Only): A Career Approach
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