8-1B (Various Inventory Issues) The following independent situations relate to inventory accounting 1. Hammer Co. purchased goods with a list price of $260,000, subject to trade discounts of 25% and 10%, with no cash discounts allowable. How much should Hammer Co. record as the cost of these goods? 2. Pine Company's inventory of $1,761,000 at December 31, 2014, was base
8-1B (Various Inventory Issues) The following independent situations relate to inventory accounting 1. Hammer Co. purchased goods with a list price of $260,000, subject to trade discounts of 25% and 10%, with no cash discounts allowable. How much should Hammer Co. record as the cost of these goods? 2. Pine Company's inventory of $1,761,000 at December 31, 2014, was base
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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B PROBLEMS
PS-1B (Various Inventory Issues) The following independent situations relate to inventory accounting.
1. Hammer Co. purchased goods with a list price of $260,000, subject to trade discounts of 25% and
10%, with no cash discounts allowable. How much should Hammer Co. record as the cost of these
goods?
2. Pine Company's inventory of $1,761,000 at December 31, 2014, was based on a physical count of
goods priced at cost and before any year-end adjustments relating to the following items.
(a) Goods shipped from a vendor f.o.b. shipping point on December 28, 2014, at an invoice cost of
$85,500 to Pine Company were received on January 2, 2015.
(b) The physical count included $61,000 of goods billed to Douglas Corp. f.o.b. shipping point on
December 31, 2014. The carrier picked up these goods on January 1, 2015.
What amount should Pine report as inventory on its balance sheet?
Potter Corp. had 1,000 units of part Z65 on hand July 1, 2014, costing $62 each. Purchases of part Z65
during July were as follows
8.
Units
Units Cost
July 3
$63.00
0o 0 0
27
A physical count on July 31, 2014, shows 1,500 units of part Z65 on hand. Using the FIFO method,
what is the cost of part Z65 inventory at July 31, 2014? Using the LIFO method, what is the inventory
cost? Using the average cost method, what is the inventory cost?
4. Hsieh Company adopted the dollar-value LIFO method on January 1, 2014 (using internal price in-
dexes and multiple pools). The following data are available for inventory pool A for the 2 years fol-
lowing adoption of LIFO.
At Base-
At Current-
Inventory
Year Cost
Year Cost
$334,000
375,440
449,080
1/1/2014
$334,000
12/31/2014
12/31/2015
412,000
Computing an internal price index and using the dollar-value LIFO method, at what amount should
the inventory be reported at December 31, 2014?
5. White Inc., a mega retail store, had the following information in its general ledger for the year 2014.
Merchandise purchased for resale
Interest on notes payable to vendors
Purchase returns
$2,684,100
12,800
121,600
56,100
31,100
24,850
Freight-in
Freight-out
Cash discounts on purchases
What is White's inventoriable cost for 2014?
Instructions
Answer each of the preceding questions about inventories, and explain your answers.
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