CHAPTER8 Val uat i onofI nvent or i es:ACost Basi sAppr oach ASSI GNMENTCLASSI FI CATI ONT ABLE( BYTOPI C)
Topi cs
Quest i ons
Br i e f Concept s Exer ci ses Exer ci ses Pr obl ems f orAnal y si s
1.
I nv ent or yacc ount s; 1,2,3,4, det er mi ni ngquant i t i es , 5,6,8,9 c os t s ,andi t emst obe i nc l udedi ni nv ent or y ; t hei nv ent or yequat i on; bal anc es heetdi s c l os ur e.
1,3
1,2,3, 4,5,6
1,2,3
2.
Per pet ual v s .per i odi c .
2
9,13, 1 7,2 0
4,5,6
3.
Rec or di ngofdi s c ount s .
10,11
7,8
3
4.
I nv ent or yer r or s .
7
4
5,10, 1 1,1 2
2
5.
Fl owas s umpt i ons .
12,13,16, 1 8,2 0
5,6,7
9,13,14, 1,4,5, 15,16,17, 6,7 18,19,20, 2 1,2 2
5,6,7,8,11
6.
I nv ent or yacc ount i ng changes.
18
6,7,10
7.
Dol l ar v al ueLI FO met hods.
14,15,17, 1 8,1 9
8,9
7
22,23,24, 1,8,9, 2 5,2 6 1 0,1 1
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1,2,3,5
4
8,9
( Fo rI n s t r u ct o rUs eOn l y )
81
ASSI GNMENTCLASSI FI CATI ONTABLE( BYLEARNI NG OBJECTI VE)
Le ar ni ngObj e ct i v es
Concept s Br i ef f or Quest i ons Exer ci ses Exe r ci ses Pr obl ems Ana l y si s
1. I dent i f ymaj orc l as s i fi c at i onso fi nv ent or y . 1
1
2. Di st i ngui shbet weenper pet ualand per i odi ci nv ent or ys y st ems .
3
2
4,9,13, 17
3. Det er mi net hegoodsi ncl udedi n i n v ent or yand t heeffec t sofi nv ent or yer r or sont he fi nanc i al s t at ement s .
4,5,6,7
4
5,10,11, 2 12
CA83, CA85
4. Under st andt hei t ems mst oi ncl udeas i nv ent or yc os t .
8
3
1,2,3,4, 1,2,3 5,6,7,8
CA81, CA8 2 , CA84
5. Desc r i beandc omp mpar et hec ost flo w a ss u mp mp t i o nsus edt oa cc ou ntf o r i nv ent or i es .
9,10,11, 12
5,6,7
9,13,14, 1,4,5,6, CA8 6 , 15,16,17, 7 CA8 7 , 18,19,20, CA810 22
6. Expl ai nt hesi gni ficanceanduseofa L I FO r e s er v e .
13,18
7. Under st andt heeffect ofLI FO l i qui dat i ons .
20
8. Ex pl ai nt hedol l ar v al ueLI FO met hod.
14,15,17, 8,9 19
9. I dent i f yt hemaj oradvant agesand d i s a dv a nt a ge s o fL I FO.
16
10. Under st andwhyc omp mpani essel ectgi v en i n v en t o r yme me t h od s.
82
4,5,6
21
CA811
22,23,24, 1,8,9, 2 5,2 6 1 0,1 1
CA89 CA86, CA8 8 , CA810
2
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( Fo rI n st r u ct o rUs eOn l y )
ASSI GNMENTCLASSI FI CATI ONTABLE( BYLEARNI NG OBJECTI VE)
Le ar ni ngObj e ct i v es
Concept s Br i ef f or Quest i ons Exer ci ses Exe r ci ses Pr obl ems Ana l y si s
1. I dent i f ymaj orc l as s i fi c at i onso fi nv ent or y . 1
1
2. Di st i ngui shbet weenper pet ualand per i odi ci nv ent or ys y st ems .
3
2
4,9,13, 17
3. Det er mi net hegoodsi ncl udedi n i n v ent or yand t heeffec t sofi nv ent or yer r or sont he fi nanc i al s t at ement s .
4,5,6,7
4
5,10,11, 2 12
CA83, CA85
4. Under st andt hei t ems mst oi ncl udeas i nv ent or yc os t .
8
3
1,2,3,4, 1,2,3 5,6,7,8
CA81, CA8 2 , CA84
5. Desc r i beandc omp mpar et hec ost flo w a ss u mp mp t i o nsus edt oa cc ou ntf o r i nv ent or i es .
9,10,11, 12
5,6,7
9,13,14, 1,4,5,6, CA8 6 , 15,16,17, 7 CA8 7 , 18,19,20, CA810 22
6. Expl ai nt hesi gni ficanceanduseofa L I FO r e s er v e .
13,18
7. Under st andt heeffect ofLI FO l i qui dat i ons .
20
8. Ex pl ai nt hedol l ar v al ueLI FO met hod.
14,15,17, 8,9 19
9. I dent i f yt hemaj oradvant agesand d i s a dv a nt a ge s o fL I FO.
16
10. Under st andwhyc omp mpani essel ectgi v en i n v en t o r yme me t h od s.
82
4,5,6
21
CA811
22,23,24, 1,8,9, 2 5,2 6 1 0,1 1
CA89 CA86, CA8 8 , CA810
2
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( Fo rI n st r u ct o rUs eOn l y )
ASSI GNMENTCHARACTERI STI CSTABLE I t em
De scr i pt i on
Levelof Di fficul t y
E81 E82 E83 E84 E85 E86 E87 E88 E89 E810 E811 E812 E813 E814 E815 E816 E817 E818 E819 E820 E821 E822 E823 E824 E825 E826
I nv ent or i abl ec os t s . I nv ent or i abl ec os t s . I nv ent or i abl ec os t s . I nv ent or i abl ec os t s —per pet ual . I nv ent or i abl ec os t s —er r oradj us t ment s . Det er mi ni ngme r c handi s eamount s —per i odi c . Pur c has esr ec or dednet . Pur c has esr ec or ded,gr os smet hod. Per i odi cv er s usper pet ual ent r i es . I nv ent or yer r or s —p er i odi c . I nv ent or yer r or s . I nv ent or yer r or s . FI FO andLI FO— O—p per i odi candper pet ual . FI FO,LI FO andav er agec os tdet er mi nat i on. FI FO,LI FO,a v er agec os ti nv ent or y . Co mput eFI FO,LI FO,av er agec os t —per i odi c . FI FO andLI FO—per i odi candper pet ual . FI FOandLI FO;i nc omes t at ementpr es ent at i on. FI FO andLI FO effec t s . FI FO andLI FO—per i odi c . LI FO effec t . Al t er nat ei nv ent or ymet hods —c ompr ehens i v e. Dol l ar v al ueLI FO. Dol l ar v al ueLI FO. Dol l ar v al ueLI FO. Dol l ar v al ueLI FO.
Moder at e Moder at e Si mpl e Si mpl e Moder at e Si mpl e Si mpl e Si mpl e Mo der at e Si mpl e Si mpl e Moder at e Moder at e Moder at e Moder at e Moder at e Si mp l e Si mpl e Moder at e Si mpl e Moder at e Moder at e Si mpl e Si mpl e Moder at e Moder at e
15–20 10–15 10–15 10–15 15–20 10–20 10–15 20–25 15–25 10–15 10–15 15–20 15–20 20–25 15–20 15–20 10–15 15–20 20–25 10–15 10–15 25–30 5–10 15–20 20–25 15–20
P81 P82 P83 P84 P85 P86
Var i ousi nv ent or yi s s ues . I nv ent or yadj us t ment s . Pur c has esr ec or dedgr os sandnet . Comput eFI FO,LI FO,andav er agec os t . Comput eFI FO,LI FO,andav er agec os t . Compu t eFI FO,LI FO,an dav er ag ec os t —pe r i od i c andper pe t ual . Fi nanc i al s t at ementeffec t sofFI FO andLI FO. Dol l ar v al ueLI FO. I nt er nal i ndex es —dol l ar v al ueLI FO. I nt er nal i ndex es —dol l ar v al ueLI FO. Dol l ar v al ueLI FO.
Moder at e Moder at e Si mpl e Compl ex Compl ex Moder at e
30–40 25–35 20–25 40–55 40–55 25–35
Moder at e Moder at e Mo der at e Compl ex Moder at e
30–40 30–40 25–35 30–35 40–50
P87 P88 P89 P810 P811
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Ti me ( mi nut es)
( Fo rI n s t r u ct o rUs eOn l y )
83
ASSI GNMENTCHARACTERI STI CSTABLE( Cont i nued)
I t em
De scr i pt i on
Levelof Di fficul t y
CA81 CA82 CA83 CA84 CA85 CA86 CA87 CA88 CA89 CA810 CA811
I nv ent or i abl ec os t s . I nv ent or i abl ec os t s . I nv ent or i abl ec os t s . Ac c ount i ngt r eat mentofpur c has edi s c ount s . Gener al i nv ent or yi s s ues . LI FO i nv ent or yadv ant ages . Av er agec os t ,FI FO,andLI FO. LI FO appl i c at i onandadv ant ages . Dol l ar v al ueLI FO i s s ues . FI FO andLI FO. LI FO Choi c es
Moder at e Moder at e Moder at e Si mpl e Moder at e Si mpl e Si mpl e Moder at e Moder at e Moder at e Moder at e
84
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Ti me ( mi nut es) 15–20 15–25 25–35 15–25 20–25 15–20 15–20 25–30 25–30 30–35 20–25
( Fo rI n st r u ct o rUs eOn l y )
SOLUTI ONSTO BRI EFEXERCI SES BRI EFEXERCI SE81 RI VERACOMPANY Bal a nceShee t( Par t i al ) Dec ember31 Cur r e nta ss et s Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 190, 000 Recei vabl es( net ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400, 000 I nvent or i es Fi ni shedgoods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $170, 000 Wor ki npr ocess. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200, 000 Raw mat er i al s. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335, 000 705, 000 Pr epai di nsur ance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41, 000 Tot alcur r entasset s. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1, 336, 000 BRI EFEXERCI SE82 I nvent or y( 1 50X$34) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 100 Account sPayabl e. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Account sPayabl e( 6X$34) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I nvent or y. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5, 100
204 204
Account sRecei vabl e( 125X$50) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 250 Sal es. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6, 250
CostofGoodsSol d( 125X$34) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 250 I nvent or y. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4, 250
BRI EFEXERCI SE83 December31i nvent or yperphysi calcount . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 200, 000
Goodsi nt r ansi tpur chasedFOBshi ppi ngpoi nt . . . . . . . . . . . . . . . . . . .
25, 000
Goodsi nt r ansi tsol dFOBdest i nat i on. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22, 000
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( Fo rI n s t r u ct o rUs eOn l y )
85
December31i nvent or y
$ 247, 000
BRI EFEXERCI SE84 Costofgoodssol dasr epor t ed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Over st at ementof12/ 31/ 13i nvent or y. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Over s t at ementof12/ 31/ 14i nvent or y. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cor r ect edcostofgoodssol d. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1, 400, 000 ( 110, 000) 35, 000 $1, 325, 000
12/ 31/ 14r et ai nedear ni ngsasr epor t ed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Over s t at ementof12/ 31/ 14i nvent or y. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cor r ect ed12/ 31/ 14r et ai nedear ni ngs. . . . . . . . . . . . . . . . . . . . . . . . . . . .
$5, 200, 000 ( 35, 000) $5, 165, 000
BRI EFEXERCI SE85 $ 11 , 8 50 = $ 11. 85 1, 000 $ 4, 740
Wei ght edaver agecostperuni t Endi ngi nvent or y400X$11. 85= Costofgoodsavai l abl ef orsal e Deductendi ngi nvent or y Costofgoodssol d( 600X$11. 85)
$11, 850 4, 740 $ 7, 110
BRI EFEXERCI SE86 Apr i l23 Apr i l15 Endi ngi nvent or y Costofgoodsavai l abl ef orsal e Deductendi ngi nvent or y Costofgoodssol d
350X$13 =$ 4, 550 50X$12 = 600 $ 5, 150 $11, 850 5, 150 $ 6, 700
BRI EFEXERCI SE87 Apr i l1 Apr i l15 Endi ngi nvent or y Costofgoodsavai l abl ef orsal e Deductendi ngi nvent or y 86
250X$10 = $ 2, 500 150X$12 = 1, 800 $ 4, 300 $11, 850 4, 300
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( Fo rI n st r u ct o rUs eOn l y )
Costofgoodssol d
$ 7, 550
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( Fo rI n s t r u ct o rUs eOn l y )
87
BRI EFEXERCI SE88 2013
$100, 000
2014 $119, 900÷1 . 10=$109, 000 $100, 000X1. 00. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9, 000*X1. 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$100, 000 9, 900 $ 10 9, 9 00
* $ 10 9, 0 00–$ 10 0, 0 00 2015 $134, 560÷1 . 16=$116, 000 $100, 000X1. 00. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9, 000X1. 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7, 000* *X1. 16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$100, 000 9, 900 8, 120 $ 11 8, 0 20
* * $ 11 6, 0 00–$ 10 9, 00 0 BRI EFEXERCI SE89 2014i nvent or yatbaseamount( $22, 140÷1. 08) 2013i nvent or yatbaseamount I ncr easei nbasei nvent or y 2014i nvent or yunderLI FO Layerone $19, 750X1. 00 Layert wo $ 750X1. 08
$ 20, 500 ( 19, 750) $ 750
2015i nvent or yatbaseamount( $25, 935÷1. 14) 2014i nvent or yatbaseamount I ncr easei nbasei nvent or y 2015i nvent or yunderLI FO Layerone $19, 750X1. 00 Layert wo $ 750X1. 08 Layert hr ee $ 2, 250X1. 14
$ 22, 750 20, 500 $ 2, 250
88
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$ 19, 750 810 $ 20 , 56 0
$ 19, 750 810 2, 565 $ 23 , 12 5
( Fo rI n st r u ct o rUs eOn l y )
SOLUTI ONSTO EXERCI SES EXERCI SE81( 15–20mi nut es) I t e ms1 ,3,5,8,11 ,1 3,14 ,1 6,a nd1 7woul dber epor t eda si nv ent or yi nt he fina nc i a ls t a t e me nt s . Thef ol l owi ngi t emswoul dnotber epor t edasi nvent or y: 2. Costofgoodssol di nt hei ncomest at ement . 4. Notr epor t edi nt hefinanci alst at ement s. 6. Costofgoodssol di nt hei ncomest at ement . 7. Costofgoodssol di nt hei ncomest at ement . 9. I nt er estexpensei nt hei ncomest at ement . 10. Adver t i si ngexpensei nt hei ncomest at ement . 12. Officesuppl i esi nt hecur r entasset ssect i onoft hebal ancesheet . 15. Notr epor t edi nt hefinanci alst at ement s. 18. Shor t t er mi nvest ment si nt he cur r entassetsect i on oft he bal ance sheet. EXERCI SE82( 10–15mi nut es) I nvent or yperphysi calcount Goodsi nt r ansi tt ocust omer ,f . o. b.dest i nat i on Goodsi nt r ansi tf r om vendor ,f . o. b.sel l er I nvent or yt ober epor t edonbal ancesheet
$441, 000 + 38, 000 + 51, 000 $530, 000
Theconsi gned goodsof$61 , 000ar enotowned byJoseOl i vaand wer e pr oper l yexcl uded. Thegoodsi nt r ans i tt oacus t ome rof$ 46, 0 00,shi ppe df . o. b.s hi ppi ngpoi nt , ar e pr oper l y excl uded f r om t hei nvent or y because t het i t l et ot hegoods pa ss ed whe nt he yl e f tt hes el l e r( Ol i v a)a nd t he r e f or e as al ea nd r e l a t e d costofgoodssol dshoul dber ecor dedi n2014. Thegoodsi nt r a ns i tf r om av endorof$ 83 , 0 00 ,s hi ppe df . o. b.de st i na t i on, ar e pr oper l y excl uded f r om t hei nvent or y because t het i t l et ot hegoods doesnotpas st oOl i v aunt i lt hebuy er( Ol i v a)r e ce i v est hem.
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( Fo rI n s t r u ct o rUs eOn l y )
89
EXERCI SE83( 10–15mi nut es) 1. I ncl ude.Owner shi p oft he mer chandi se pass es t o cust omeronl y wheni ti sshi pped. 2.
Donoti ncl ude.Ti t l edi dnotpassunt i lJanuar y3.
3.
I ncl udei ni nvent or y. Pr oductbel ongedt oHar l oweI nc.atDecember31, 2014.
4.
I ncl udei ni nvent or y.Underi nvoi cet er ms,t i t l epassed when goods wer eshi pped.
5. Donoti ncl ude.Goodsr ecei vedonconsi gnmentr emai nt hepr oper t y oft hecons i gnor . EXERCI SE84( 10–15mi nut es) 1. 2.
Raw Mat er i al sI nvent or y Account sPayabl e
8, 100
Raw Mat er i al sI nvent or y Account sPayabl e
28, 000
3.
Noadj ust mentnecessa r y .
4.
Account sPayabl e Raw Mat er i al sI nvent or y
5.
8 1 0
Raw Mat er i al sI nvent or y Account sPayabl e
8, 100 28, 000
7, 500 7, 500 19, 800
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19, 800
( Fo rI n st r u ct o rUs eOn l y )
EXERCI SE85( 15–20mi nut es) ( a) I nvent or yDecember31,2014( unadj ust ed) Tr ansact i on2 Tr ansact i on3 Tr ansact i on4 Tr ansact i on5 Tr ansact i on6 Tr ansact i on7 Tr ansact i on8 I nvent or yDe cember31,2014( adj ust ed)
$234, 890 13, 420 008, 540 ( 10, 438) ( 10, 520) 1, 500 $237, 392
( b) Tr ansac t i on3 Sal esRevenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12, 800 Account sRecei vabl e. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12, 800 ( T or e ver ses al ee nt r yi n20 14 ) T r a nsa ct i on4 Pur chases( I nvent or y) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15, 630 Account sPayabl e. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15, 630 ( Tor ecor dpur chaseofmer chandi se i n2 01 4) T r a nsa ct i on8 Sal esRet ur nsandAl l owances. . . . . . . . . . . . . . . . . . . . . Account sRecei vabl e. . . . . . . . . . . . . . . . . . . . . . . . . . . .
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2, 600 2, 600
( Fo rI n s t r u ct o rUs eOn l y )
81 1
EXERCI SE86( 10–20mi nut es) 2013 Sal es Sal esRet ur ns NetSal es Begi nni ngI nvent or y Endi ngI nvent or y Purchases Pur chaseRet ur nsandAl l owances Fr ei ght i n CostofGoodSol d Gr ossPr ofit
2014
2015
$290, 000 $ $ 41 0, 0 00 36 0, 0 00 ( 11, 000) ( 13, 000) ( 20, 000) 3 47 , 0 00 39 27 9, 0 00 0, 0 00 20, 000 32, 000 37, 000* * ( 32, 000* ) ( 37, 000) ( 44, 000) 260, 000 298, 000 24 2, 0 00 ( 5, 000) ( 8, 000) ( 10, 000) 8, 000 9, 000 1 2, 00 0 ( 233, 000) ( ( 293, 000) 256, 00 ) 0 $ 46, 000 $ 91, 000 $ 97, 000
* Thi swasgi venast hebegi nni ngi nvent or yf or2014. * * Thi swa sc al c ul a t e da st hee ndi ngi nv ent or yf or2 01 4.
EXERCI SE87( 10–15mi nut es) ( a ) May10
Pur chases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 . . 4 . . , . 7 . . 0 . . 0 . . . . . . . . . . . . Account sPayabl e. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 . 4, 7 00 ( $ 15 , 0 00X. 9 8)
May11
Pur chases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 . . 3 . . , . 0 . . 6 . . 8 . . . . . . . . . . . . Account sPayabl e. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 . 3, 0 68 ( $ 13 , 2 00X. 9 9)
May19
Account sPayabl e. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 . . 4 . . , . 7 . . 0 . . 0 . . . . . . . . . . . . Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 . 4, 7 00
May24
Pur chases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 . . 1 . . , . 2 . . 7 . . 0 . . . . . . . . . . . . Account sPayabl e
8 1 2
n t e r me di a t eAc c oun t i ng ,1 Copyr i ght©2013JohnWi l ey&Sons,I nc. Ki eso,I 5/ e ,So l u t i o nsMa nu al
( Fo rI n st r u ct o rUs eOn l y )
( $11, 5 00X. 9 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 . 1, 270
n t e r me di a t eAc c ou nt i n g,1 Copyr i ght©2013JohnWi l ey&Sons,I nc. Ki eso,I 5/ e ,So l u t i o nsMa nu al
( Fo rI n s t r u ct o rUs eOn l y )
81 3
EXERCI SE87( Cont i nued) ( b) May31
Pur chaseDi scount sLost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 . . 3 . . 2 . . . . . Account sPayabl e ( $13, 200X. 01) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 ( Di scountl ostonpur chaseof Ma y1 1,$1 3, 2 00,t e r ms1 / 1 5,n/ 30 )
EXERCI SE88( 20–25mi nut es) ( a) Feb. 1
I nvent or y[ $10, 800–( $10, 800X10%) ] . . . . . . . . . . . . 9 . . , . 7 . . 2 . . 0 . . . . . . . . . Account sPayabl e. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 720
Feb. 4
Account sPay abl e[ $2, 50 0– ( $2, 500X10%) ] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 . . , . 2 . . 5 . . 0 . . . . . . . . . I nvent or y. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 250
Feb.13
Account sPayabl e( $9, 720–$2, 250) . . . . . . . . . . . . . . . . 7 . . , . 4 . . 7 . . 0 . . . . . . . . . I nvent or y( 3% X$7, 470) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 . 24. 10 Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 . . , . 2 . 45. 90
( b) Feb. 1
Pur chases[ $10, 800–( $10, 800X10%) ] . . . . . . . . . . 9 . . , . 7 . . 2 . . 0 . . . . . . . . . Account sPayabl e. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 720
Feb. 4
Account sPay abl e[ $2, 500–( $2, 500X 10%) ] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 . . , . 2 . . 5 . . 0 . . . . . . . . . Pur chaseRet ur nsandAl l owances. . . . . . . . . . . . . . . . . . . . . . . . . . 2 , 250
Feb.13
Account sPayabl e( $9, 720–$2, 250) . . . . . . . . . . . . . . . . 7 . . , . 4 . . 7 . . 0 . . . . . . . . . Pur c haseDi scount s( 3% X$7, 470) . . . . . . . . . . . . . . . . . . . . . . . . . . 2 . 24. 10 Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 . . , . 2 . 45. 90
( c) Pur chasepr i ce( l i st ) Less:Tr adedi scount( 10% X$10, 800) 8 1 4
$10, 800. 00 1, 080. 00
n t e r me di a t eAc c oun t i ng ,1 Copyr i ght©2013JohnWi l ey&Sons,I nc. Ki eso,I 5/ e ,So l u t i o nsMa nu al
( Fo rI n st r u ct o rUs eOn l y )
Pr i ceonwhi chcashdi scountbased Less:Cashdi scount( 3% X$9, 720) Netpr i ce
9, 720. 00 291. 60 $ 9, 428. 40
n t e r me di a t eAc c ou nt i n g,1 Copyr i ght©2013JohnWi l ey&Sons,I nc. Ki eso,I 5/ e ,So l u t i o nsMa nu al
( Fo rI n s t r u ct o rUs eOn l y )
81 5
EXERCI SE89( 15–25mi nut es) ( a) Jan. 4
Account sRecei vabl e. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 . . 4 . . 0 . . . . . . . . . . . . Sal esRevenue( 8 0X$8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 640
Jan.11
Pur chases( $ 150X$6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 . . 0 . . 0 . . . . . . . . . . . . Account sPayabl e. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 900
Jan.13
Account sRecei vabl e. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 . . , . 0 . . 5 . . 0 . . . . . . . . . . . . Sal esRevenue( 1 20X$8. 75) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 050
Jan.20
Pur chases( 1 60X$7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 . . , . 1 . . 2 . . 0 . . . . . . . . . . . . Account sPayabl e. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 120
Jan.27
Account sRecei vabl e. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 . . 0 . . 0 . . . . . . . . . . . . Sal esRevenue( 1 00X$9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 900
Jan.31
I nvent or y( $7X110) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 . . 7 . . 0 . . . . . . . . . . . . CostofGoodsSol d. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 . . , . 7 . . 5 . . 0 . . * . . . . . . . . . . Pur chases( $ 900+$1, 120) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 020 I nvent or y( 100X$5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500
* ( $500+$2, 020–$770) ( b) Sal esr evenue( $640+$1, 050+$900) Costofgoodssol d Gr osspr ofit
8 1 6
$2, 590 1, 750 $ 840
n t e r me di a t eAc c oun t i ng ,1 Copyr i ght©2013JohnWi l ey&Sons,I nc. Ki eso,I 5/ e ,So l u t i o nsMa nu al
( Fo rI n st r u ct o rUs eOn l y )
EXERCI SE89( Cont i nued) ( c) Jan. 4
Account sRecei vabl e. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 . . 4 . . 0 . . . . . . . . . . . Sal esRevenue( 8 0X$8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .640 CostofGoodsSol d. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 . . 0 . . 0 . . . . . . . . . . . I nvent or y( 80X$5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .400
Jan.11
I nvent or y. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 . . 0 . . 0 . . . . . . . . . . . Account sPayabl e( 150X$6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .900
Jan.13
Account sRecei vabl e. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 . . , . 0 . . 5 . . 0 . . . . . . . . . . . Sal esRevenue( 120X$8. 75) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 050 CostofGoodsSol d. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 . . 0 . . 0 . . . . . . . . . . . I nv ent or y( [ ( 20X$5)+ ( 100X$6) ] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .700
Jan.20
I nvent or y. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 . . , . 1 . . 2 . . 0 . . . . . . . . . . . Account sPayabl e( 160X$7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 120
Jan.27
Account sRecei vabl e. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 . . 0 . . 0 . . . . . . . . . . . Sal esRevenue( 100X$9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .900 CostofGoodsSol d. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 . . 5 . . 0 . . . . . . . . . . . I nv ent or y[ ( 50X$6)+ ( 50X$7) ] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .650
( d) Sal esr evenue Costofgoodssol d ( $400+$700+$650) Gr osspr ofit
$2, 590 1, 750 $ 840
n t e r me di a t eAc c ou nt i n g,1 Copyr i ght©2013JohnWi l ey&Sons,I nc. Ki eso,I 5/ e ,So l u t i o nsMa nu al
( Fo rI n s t r u ct o rUs eOn l y )
81 7
EXERCI SE810( 10–15mi nut es)
1. Wor ki ngcapi t al Cur r entr at i o Ret ai nedear ni ngs Neti ncome
Cur r entYear Over st at ed Over st at ed Over st at ed Over st at ed
SubsequentYear Noeffect Noeffect Noeffect Under st at ed
2. Wor ki ngcapi t al Cur r entr at i o Ret ai nedear ni ngs Neti ncome
Noeffect Over st at ed* Noeffect Noeffect
Noeffect Noeffect Noeffect Noeffect
3. Wor ki ngcapi t al Cur r entr at i o Ret ai nedear ni ngs Neti ncome
Over st at ed Over st at ed Over st at ed Over st at ed
Noeffect Noeffect Noeffect Under st at ed
* As sumet ha tt hec or r ec tc ur r entr a t i oi sgr ea t ert ha none. EXERCI SE811( 10–15mi nut es) ( a)
$ 37 0, 0 00 =1. 85t o1 $ 20 0, 0 00
( b)
$370, 000+$22, 000–$13, 000+$3, 000 $ 38 2, 0 00 = =2. 06t o1 $200, 000–$15, 000 $185, 000
( c) 1. 2. 3. 4.
8 1 8
Event Under st at ementofendi ng i nv ent or y Over st at ementofpur chases Over st at ementofendi ng i nv ent or y Over st at ementofadver t i si ng expense;under st at ement ofcostofgoodssol d
EffectofEr r or De cr easesneti ncome
Adj ustI ncome I ncr ease( Decr ease) $22, 000
Decr easesneti ncome I ncr easesneti ncome
n t e r me di a t eAc c oun t i ng ,1 Copyr i ght©2013JohnWi l ey&Sons,I nc. Ki eso,I 5/ e ,So l u t i o nsMa nu al
15, 000 ( 13, 000)
0 $ 24 , 0 00
( Fo rI n st r u ct o rUs eOn l y )
EXERCI SE812( 15–20mi nut es) Er r or si nI nv ent or i es
Year 2009 2010 2011 2012 2013 2014
Net I ncome PerBooks $ 50, 000 52, 000 54, 000 56, 000 58, 000 60, 000 $330, 000
Add Ov er s t a t e mentJan.1
Deduct Deduct Add Under st at e- Ov er s t a t e - Under st at e- Cor r ect ed mentJan.1 mentDec.31 mentDec.31 NetI ncome $3, 000 9, 000
$3, 000 9, 000
$11, 000 $11, 000 2, 000 2, 000
8, 000
$ 47, 000 46, 000 74, 000 45, 000 60, 000 50, 000 $322, 000
EXERCI SE813( 15–20mi nut es) ( a)
Uni t si nendi ngi nv ent or y Begi nni ngbal ance Pur chase Goodsavai l abl e Sal es Endi ngbal ance
( b)
300 1, 300 1, 600 ( 1, 000) 600
CostofGoodsSol d ( 1) LI FO 500@ $13= $ 6, 500 500@ $12= 6, 000 $12, 500
Endi ngI nvent or y 300@ $10= $3, 000 300@ $12= 3, 600 $6, 600
( 2) FI FO
300@ $10= $ 3, 000 700@ $12= 8, 400 $11, 400
500@ $13= 100@ $12=
LI FO
100@ $10= $ 1, 000 300@ $12= 3, 600 200@ $13= 2, 600 $7 , 2 00
n t e r me di a t eAc c ou nt i n g,1 Copyr i ght©2013JohnWi l ey&Sons,I nc. Ki eso,I 5/ e ,So l u t i o nsMa nu al
$6, 500 1, 200 $7, 700
( Fo rI n s t r u ct o rUs eOn l y )
81 9
8 2 0
n t e r me di a t eAc c oun t i ng ,1 Copyr i ght©2013JohnWi l ey&Sons,I nc. Ki eso,I 5/ e ,So l u t i o nsMa nu al
( Fo rI n st r u ct o rUs eOn l y )
EXERCI SE813( Cont i nued) ( c) Sal esr evenue Cos tofGoodsSol d Gr ossPr ofit( FI FO)
$25, 400 =( $24X2 00)+( $25X5 00)+ ( $27X300) 11, 400 =( 200@ $10)+( 100@ $10) $14, 000 +( 400@ $12)+( 300@ $12)
Not e:FI FO per i odi candFI FO per pet ualpr ovi det hesamegr osspr ofit a ndi nv ent or yva l ue . ( d) LI FO mat ches mor e cur r entcost s wi t hr ev enue.When pr i ces ar e r i s i ng( a si sge ne r a l l yt hec as e) ,t hi sr es ul t si nahi ghe ramountf or costofgoods sol d and a l owergr oss pr ofit .As i ndi cat ed i nt hi s exer ci se,pr i ceswer er i si ngandcostofgoodssol dunderLI FO was hi ghe r . EXERCI SE814( 20–25mi nut es) ( a) ( 1) LI FO
600@ $6. 00= $3, 600 100@ $6. 08= 608 $ 4, 208
( 2) Aver agecost T ot alc os t = Tot aluni t s
$ 33 , 6 55 * =$6 . 3 5a v er a gecos tpe runi t 5, 300
700@ $6. 35=$4, 445 * Uni t s 600 1, 500 800 1, 200 700 500 5, 300
@ @ @ @ @ @
Pr i ce $6. 00 $6. 08 $6. 40 $6. 50 $6. 60 $6. 79
= = = = = =
Tot alCost $ 3, 600 9, 120 5, 120 7, 800 4, 620 3, 395 $33, 655
n t e r me di a t eAc c ou nt i n g,1 Copyr i ght©2013JohnWi l ey&Sons,I nc. Ki eso,I 5/ e ,So l u t i o nsMa nu al
( Fo rI n s t r u ct o rUs eOn l y )
82 1
EXERCI SE814( Cont i nued) ( b) ( 1) FI FO
500@ $6. 79= $3, 395 200@ $6 . 60= 1, 320 $4, 715
( 2) LI FO
100@ $6. 00= $ 600 100@ $6. 08= 608 500@ $6 . 79= 3, 395 $4, 603
( c) Tot almer chandi seav ai l abl ef orsal e Less:I nvent or y( FI FO) Costofgoodssol d
$33, 655 4, 715 $28, 940
( d) FI FO. EXERCI SE815( 15–20mi nut es) ( a)
Shani aTwai nCompany COMPUTATI ONOFI NVENTORYFORPRODUCT BAPUNDER FI FO I NVENTORYMETHOD Mar ch31,2014
Mar ch26,2014 Febr uar y16,2014 Januar y25,2014( por t i on) Mar ch31,2014,i nvent or y ( b)
Uni tCost $12. 00 11. 00 10. 00
Tot alCost $ 7, 200 8, 800 2, 000 $18, 000
Shani aTwai nCompany COMPUTATI ONOFI NVENTORYFORPRODUCT BAPUNDER LI FO I NVENTORYMETHOD Mar ch31,2014
Begi nni ngi nvent or y Januar y5,2014( por t i on) Mar ch31,2014,i nvent or y
8 2 2
Uni t s 600 800 200 1, 600
Uni t s 600 1, 000 1, 600
Uni tCost $8. 00 9. 00
n t e r me di a t eAc c oun t i ng ,1 Copyr i ght©2013JohnWi l ey&Sons,I nc. Ki eso,I 5/ e ,So l u t i o nsMa nu al
Tot alCost $ 4, 800 9, 000 $13, 800
( Fo rI n st r u ct o rUs eOn l y )
EXERCI SE815( Cont i nued) ( c)
Shani aTwai nCompany COMPUTATI ONOFI NVENTORYFORPRODUCT BAPUNDERWEI GHTEDAVERAGEI NVENTORYMETHOD Mar ch31,2014
Begi nni ngi nvent or y Januar y5,2014 Januar y25,2014 Febr uar y16,2014 Mar ch26,2014
Uni t s 600 1, 200 1, 300 800 600 4, 500
Wei ght edaver agecost ( $44, 600÷4, 500) Mar ch31,2014,i nvent or y * Roundedoff.
Uni tCost $ 8. 00 9. 00 10. 00 11. 00 12. 00
Tot alCost $ 4, 800 10, 800 13, 000 8, 800 7, 200 $44, 600
$ 9. 91* 1, 600
$ 9. 91
$15, 856
EXERCI SE816( 15–20mi nut es) ( a) ( 1)2, 100uni t savai l abl ef orsal e–1, 400uni t ssol d=700uni t si nt he e ndi ngi nv ent or y . 500@ $4. 58= $2, 290 200@ 4. 60= 920 700 $3, 210 Endi ngi nvent or yatFI FO cost . ( 2)100@ $4. 10= $ 410 600@ 4. 20= 2, 520 700 $2, 930 Endi ngi nvent or yatLI FO cost . ( 3 )$ 9, 2 40c os tofgoodsa v ai l a bl ef ors a l e÷2 , 1 00uni t sa v ai l a bl ef or s al e=$ 4. 4 0we i ght e da v er a geuni tc os t . 700uni t sX $4. 40=$3, 080Endi ngi nvent or yatwei ght edaver age c o s t .
n t e r me di a t eAc c ou nt i n g,1 Copyr i ght©2013JohnWi l ey&Sons,I nc. Ki eso,I 5/ e ,So l u t i o nsMa nu al
( Fo rI n s t r u ct o rUs eOn l y )
82 3
EXERCI SE816( Cont i nued) ( b) ( 1)LI FO wi l lyi el dt hel owestgr osspr ofitbecauset hi smet hod wi l l yi el dt he hi ghest cost of goods sol d figur ei nt he si t uat i on pr esent ed.Thecompanyhasexper i enced r i si ngpur chasepr i ces f ori t si nvent or yacqui si t i ons.I naper i odofr i si ngpr i ces,LI FO wi l l yi el dt he hi ghestcostofgoods sol d because t he mostr ecent pur c ha sepr i c es( whi c ha r et hehi ghe rpr i c esi nt hi sc as e)a r eus ed t opr i cecostofgoodssol dwhi l et heol der( andl ower )pur chase pr i c esa r eus edt oc os tt hee ndi ngi nv ent or y . ( 2)LI FO wi l lyi el dt hel owestendi ngi nvent or ybecauseLI FO usest he ol destcost st opr i cet heendi ngi nvent or yuni t s.Thecompanyhas e xpe r i e nc edr i s i ngpur c ha sepr i c es .Theol de stc os t si nt hi sc as e a r et hel owe rc os t s . EXERCI SE817( 10–15mi nut es) ( a) ( 1) 400@ $30= $12, 000 160@ $25= 4, 000 $ 16 , 0 00 ( 2) 400@ $20= $ 8, 000 160@ $25= 4, 000 $ 12 , 0 00 ( b) ( 1) FI FO ( 2) LI FO
8 2 4
$16, 000[ sameas( a) ] 100@ $20= $2, 000 60@ $25= 1, 500 400@ $30= 12, 000 $ 15 , 5 00
n t e r me di a t eAc c oun t i ng ,1 Copyr i ght©2013JohnWi l ey&Sons,I nc. Ki eso,I 5/ e ,So l u t i o nsMa nu al
( Fo rI n st r u ct o rUs eOn l y )
EXERCI SE818( 15–20mi nut es) Fi r st i n,fir st out Sal esr evenue Costofgoodssol d: I nvent or y ,Jan.1 Pur chases Costofgoodsavai l abl e I nvent or y ,Dec.31 Costofgoodssol d Gr osspr ofit Oper at i ngexpenses Neti ncome
$1, 050, 000 $120, 000 592, 000* 712, 000 ( 235, 000* * )
* Pur chases 6, 000@ $22= 10, 000@ $25= 7, 000@ $30=
* * Comput a t i onofi nv ent or y ,De c.3 1: Fi r s t i n,fir s t out : 7, 000uni t s@ $30= 1, 000uni t s@ $25=
* * * Last i n,fir st out : 6, 000uni t s@ $20= 2, 000uni t s@ $22=
477, 000 573, 000 200, 000 $ 373, 000
Last i n,fir st out $1, 050, 000 $120, 000 592, 000 712, 000 ( 164, 000* * * ) 548, 000 502, 000 200, 000 $ 302, 000
$132, 000 250, 000 210, 000 $ 59 2, 0 00
$210, 000 25, 000 $ 23 5, 0 00
$120, 000 44, 000 $ 16 4, 0 00
n t e r me di a t eAc c ou nt i n g,1 Copyr i ght©2013JohnWi l ey&Sons,I nc. Ki eso,I 5/ e ,So l u t i o nsMa nu al
( Fo rI n s t r u ct o rUs eOn l y )
82 5
EXERCI SE819( 20–25mi nut es) SandyAl omarCor por at i on SCHEDULESOFCOSTOFGOODSSOLD Fort heFi r stQuar t erEndedMar ch31,2014
Begi nni ngi nvent or y Pl uspur chases Costofgoodsavai l abl ef orsal e Less:Endi ngi nvent or y Costofgoodssol d
Schedul e1 Sc he dul e2La st i n, Fi r s t i n,Fi r s t out Fi r st out $ 40, 000 $ 40, 000 146, 200* 146, 200 186, 200 186, 200 61, 300 56, 800 $124, 900 $129, 400
* ( $ 33 , 6 00+$ 25 , 5 00+$ 38 , 7 00+$ 48 , 4 00 ) Schedul esComput i ngEndi ngI nvent or y Uni t s 10, 000 34, 000 44, 000 30, 000 14, 000
Begi nni ngi nvent or y Pl uspur chases Uni t savai l abl ef orsal e Lesssal es( $150, 000÷5) Endi ngi nvent or y
The uni tcomput at i on i st he same f orbot h assumpt i ons,butt he cost a ss i gne dt ot heuni t sofe ndi ngi nv ent or yar edi ffer e nt . Fi r s t i n,Fi r s t out( Sc he dul e1 ) 11, 000 at$4. 40= $48, 400 3, 000 at$4. 30= 12, 900 14, 000 $61, 300
8 2 6
La st i n,Fi r s t out( Sc he dul e2 ) 10, 000 at$4. 00= $40, 000 4, 000 at$4. 20= 16, 800 14, 000 $56, 800
n t e r me di a t eAc c oun t i ng ,1 Copyr i ght©2013JohnWi l ey&Sons,I nc. Ki eso,I 5/ e ,So l u t i o nsMa nu al
( Fo rI n st r u ct o rUs eOn l y )
EXERCI SE820( 10–15mi nut es) ( a) FI FO Endi ngI nvent or y12/ 31/ 14 76@ $10. 89* = $ 827. 64 24@ $11. 88* *= 285. 12 $1, 112. 76 * [ $11. 00–. 01( $11. 00) ] * * [ $12. 00–. 01( $12. 00) ] ( b) LI FO CostofGoodsSol d—2014 76@ $10. 89 = $ 827. 64 84@ $11. 88 = 997. 92 90@ $14. 85*= 1, 336. 50 15@ $15. 84* *= 237. 60 $3, 399. 66 * [ $15. 00–. 01( $15) ] * * [ $16. 00–. 01( $16) ] ( c) FI FO mat chesol dercost swi t hr evenue.Whenpr i cesar edecl i ni ng,as i nt hi scase,t hi sr esul t si nahi gheramountf orcostofgoodssol d. Ther ef or e,i ti sr ecommendedt hatFI FO beusedbyJohnnyFoot bal l Shopt omi ni mi zet axabl ei ncome. EXERCI SE821( 10–15mi nut es) ( a) The di ffer ence bet ween t he i nvent or y used f ori nt er nalr epor t i ng pur poses and LI FO i sr ef er r ed t o as t he Al l owance t o Reduce I nvent or yt o LI FO ort heLI FO r eser ve.Thechangei nt heal l owance bal ancef r om oneper i od t ot henexti scal l ed t heLI FO effect( oras showni nt hi sexampl e,t heLI FO adj ust ment ) . ( b) LI FO subt r act si nflat i on f r om i nvent or ycost sby char gi ng t hei t ems pur chased r ecent l yt o cost of goods sol d.As a r esul t ,endi ng i nvent or y( assumi ng i ncr easi ng pr i ces)wi l lbe l owert han FI FO or aver agecost .
n t e r me di a t eAc c ou nt i n g,1 Copyr i ght©2013JohnWi l ey&Sons,I nc. Ki eso,I 5/ e ,So l u t i o nsMa nu al
( Fo rI n s t r u ct o rUs eOn l y )
82 7
EXERCI SE821( Cont i nued) ( c) Cashflow wascomput edasf ol l ows: Revenue $3, 200, 000 Costofgoodssol d ( 2, 800, 000) Oper at i ngexpenses ( 150, 000) I ncomet axes ( 75, 600) Cashflow $ 174, 400 I ft hecompanyhasanysal esonaccountorpayabl es,t hent hecash flow numberi si ncor r ect .I ti sassumed her et hatt hecash basi sof account i ngi sused. ( d) Thecompanyhasext r acashbecausei t st axesar el ess.Ther eason t a xe sa r el owe ri sbe ca us ec os tofgoodss ol d( i nape r i odofi nfla t i on) i shi gherunderLI FO t hanFI FO.Asar esul t ,neti ncomei sl owerwhi ch l eadst ol oweri ncomet axes.I fpr i cesar edecr easi ng,t heopposi t e effectr esul t s. EXERCI SE822( 25–30mi nut es) ( a) ( 1) Endi ngi nvent or y—Speci ficI dent i ficat i on Dat e No.Uni t s Uni tCost December2 Jul y20
100 50 150
( 2) Endi ngi nvent or y—FI FO Dat e No.Uni t s December2 Sept ember4
100 50 150
( 3) Endi ngi nvent or y—LI FO Dat e No.Uni t s Januar y1 Mar ch15
8 2 8
100 50 150
Tot alCost
$30 25
$3, 000 1, 250 $4, 250
Uni tCost
Tot alCost
$30 28
$3, 000 1, 400 $4, 400
Uni tCost
Tot alCost
$20 24
$2, 000 1, 200 $3, 200
n t e r me di a t eAc c oun t i ng ,1 Copyr i ght©2013JohnWi l ey&Sons,I nc. Ki eso,I 5/ e ,So l u t i o nsMa nu al
( Fo rI n st r u ct o rUs eOn l y )
EXERCI SE822( Cont i nued) ( 4) Endi ngi nvent or y—Aver ageCost Dat e
Expl anat i on
Januar y1 Mar ch15 Jul y20 Sept ember4 December2
Be gi nni ngi nvent or y Pur chase Pur chase Pur chase Pur chase
No. Uni t s
Uni t Cost
T o t a l Cost
100 300 300 200 100 1, 000
$20 24 25 28 30
$ 2, 000 7, 200 7, 500 5, 600 3, 000 $25, 300
$ 25 , 3 00÷1 , 0 00=$ 25 . 3 0 Endi ngI nvent or y—Aver ageCost No.Uni t s Uni tCost Tot alCost 150
$25. 30
$3, 795
( b) Doubl eExt ensi onMet hod BaseYearCost s Uni t s 150
BaseYear CostPerUni t $20
Cur r entCost s Tot al $3, 000
Uni t s 100 50
Cur r e nt Yea r CostPerUni t $30 $28
Tot al $3, 000 1, 400 $ 4, 40 0
Endi ngI nv ent or yf ort hePe r i oda tCur r e ntCos t $4 , 4 00 = =1 . 4 66 7 Endi ngI nvent or yf ort hePer i odatBaseYearCost $3, 000 Endi ngi nvent or yatbaseye arpr i ces( $4, 400÷1. 466 7) Basel ayer( 100uni t sat$20) I ncr ementi nbaseyeardol l ar s Cur r e nti nde x I ncr ementi ncur r entdol l ar s Basel ayer( 100uni t sat$20) Endi ngi nvent or yatdol l ar val ueLI FO
n t e r me di a t eAc c ou nt i n g,1 Copyr i ght©2013JohnWi l ey&Sons,I nc. Ki eso,I 5/ e ,So l u t i o nsMa nu al
$3, 000 ( 2, 000) 1, 000 1 . 4 66 7 1, 467 2, 000 $3, 467
( Fo rI n s t r u ct o rUs eOn l y )
82 9
EXERCI SE823( 5–10mi nut es) $ 97 , 0 00–$ 92 , 0 00=$ 5, 0 00i nc r e as ea tba sepr i c es . $ 98 , 3 50–$ 92 , 6 00=$5 , 7 50i nc r e as ei ndol l ar v al ueLI FO v al ue . $5, 000XI ndex=$5, 750. I ndex=$5, 750÷$5, 000. I ndex=115
EXERCI SE824( 15–20mi nut es) ( a ) 1 2/ 3 1/ 1 4i nv ent or yat1/ 1/ 14pr i c es ,$ 140 , 0 00÷1 . 1 2 I nvent or y1/ 1/ 14 I nvent or ydecr easeatbasepr i ces
$ 125 , 0 00 160, 000 $ 35, 000
I nvent or yat1/ 1/ 14pr i ces Lessdecr easeat1/ 1/ 14pr i ces I nv ent or y12/ 31/ 14underdol l ar val ueLI FOmet hod
$160, 000 35, 000 $125, 000
( b) 1 2/ 3 1/ 1 5i nv ent or ya tba sepr i c es ,$ 17 2, 5 00÷1 . 1 5 12/ 31/ 14i nvent or yatbasepr i ces I nvent or yi ncr ementatbasepr i ces
$ 15 0, 0 00 125, 000 $ 25, 000
I nvent or yat12/ 31/ 14 I ncr ementaddeddur i ng2015at12/ 31/ 15pr i ces, $25, 000X1. 15 I nvent or y12/ 31/ 15
$125, 000 28, 750 $153, 750
EXERCI SE825( 20–25mi nut es)
2011 2012 2013 2014 2015 2016
8 3 0
Cur r ent$ $ 80, 000 115, 500 108, 000 122, 200 154, 000 176, 900
Pr i ceI ndex 1. 00 1. 05 1. 20 1. 30 1. 40 1. 45
BaseYear$ $ 80, 000 110, 000 90, 000 94, 000 110, 000 122, 000
Changef r om Pr i orYe ar — $+30, 000 ( 20, 000) +4, 000 +16, 000 +12, 000
n t e r me di a t eAc c oun t i ng ,1 Copyr i ght©2013JohnWi l ey&Sons,I nc. Ki eso,I 5/ e ,So l u t i o nsMa nu al
( Fo rI n st r u ct o rUs eOn l y )
EXERCI SE825( Cont i nued) Endi ngI nvent or y—Dol l ar val ueLI FO: 2011 $80, 000 2012 $80, 000@ 1. 00= $ 80, 000 30, 000@ 1. 05= 31, 500 $111, 500 2013 $80, 000@ 1. 00= $ 80, 000 10, 000@ 1. 05= 10, 500 $ 90, 500 2014 $80, 000@ 1. 00= $ 80, 000 10, 000@ 1. 05= 10, 500 4, 000@ 1. 30= 5, 20 0 $9 5, 7 00
2015 $80, 000@ 1. 00= 10, 000@ 1. 05= 4, 000@ 1. 30= 16, 000@ 1. 40=
$ 80, 000 10, 500 5, 200 22, 400 $118, 100
2016 $80, 000@ 1. 00= 10, 000@ 1. 05= 4, 000@ 1. 30= 16, 000@ 1. 40= 12, 000@ 1. 45=
$ 80, 000 10, 500 5, 200 22, 400 17, 400 $135, 500
EXERCI SE826( 15–20mi nut es) Dat e Dec.31,2010 Dec.31,2011 Dec.31,2012 Dec.31,2013 Dec.31,2014
Cur r ent$ $ 70, 000 90, 300 95, 120 105, 600 100, 000
Pr i ceI ndex 1. 00 1. 05 1. 16 1. 20 1. 25
BaseYear$ $70, 000 86, 000 82, 000 88, 000 80, 000
n t e r me di a t eAc c ou nt i n g,1 Copyr i ght©2013JohnWi l ey&Sons,I nc. Ki eso,I 5/ e ,So l u t i o nsMa nu al
Changef r om Pr i orYe ar — $+16, 000 ( 4, 000) +6, 000 ( 8, 000)
( Fo rI n s t r u ct o rUs eOn l y )
83 1
