Prepare the necessary journal entries related to the parts inventory.Maintenance and PartsDuring the year, Red Robin bills clients for parts for a total of $114,258. The cost of these parts to Red Robin (on a FIFO basis) was $90,322. At the end of the year, clients did not owe Red Robin for any of these parts.During the year, Red Robin purchased new parts for a total of $62,684. It has not paid for $27,493 of this by December 31. Red Robin did not owe for any parts at the beginning of the year. Red Robin does not get a discount on parts inventory.Tax ConsiderationsFor the sake of simplicity, we will assume that the uniform capitalization rules do not exist. Business and Accounting PoliciesRed Robin uses a perpetual inventory system. It uses FIFO for all inventory except finished goods. It uses dollar-value LIFO for its finished goods inventory. Dollar-value LIFO is implemented the same for book and tax purposes.Red Robin sells all goods f.o.b. destination.Red Robin uses the net method for purchase discounts. Red Robin takes all purchase discounts available. Its policy is to pay for the inventory on the last day possible to get the discount.

Inventory refers to the goods and materials that a company holds for sale or production. These can…

Answered: Prepare the necessary journal entries…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Prepare the necessary journal entries related to the parts inventory.

Maintenance and Parts

During the year, Red Robin bills clients for parts for a total of $114,258. The cost of these parts to Red Robin (on a FIFO basis) was $90,322. At the end of the year, clients did not owe Red Robin for any of these parts.

During the year, Red Robin purchased new parts for a total of $62,684. It has not paid for $27,493 of this by December 31. Red Robin did not owe for any parts at the beginning of the year. Red Robin does not get a discount on parts inventory.

Tax Considerations

For the sake of simplicity, we will assume that the uniform capitalization rules do not exist.

Business and Accounting Policies

Red Robin uses a perpetual inventory system. It uses FIFO for all inventory except finished goods. It uses dollar-value LIFO for its finished goods inventory. Dollar-value LIFO is implemented the same for book and tax purposes.
Red Robin sells all goods f.o.b. destination.
Red Robin uses the net method for purchase discounts. Red Robin takes all purchase discounts available. Its policy is to pay for the inventory on the last day possible to get the discount.

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