Intermediate Accounting (2nd Edition)
2nd Edition
ISBN: 9780134730370
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Textbook Question
Chapter 10, Problem 10.11E
Lower of Cost or Market. All-Kinds-of-Cases Company sells cases for smart phones and notepad computers. The company uses the LIFO method for costing inventory. All-Kinds-of-Cases groups inventory by the device manufacturer for which the case is made in its LCM computations. All-Kinds-of-Cases provided the following information regarding inventory at the end of the current year
Group No. | Manufacturer | CRC | No. of Units | SP | Disposal | NPM | Cost |
Smart phone case | General Tech | $8 | 450 | $14 | $1 | $ 6 | $ 5 |
Notepad case | General Tech | 14 | 300 | 35 | 2 | 18 | 16 |
Smart phone case | Pacific Base | 5 | 750 | 8 | 2 | 4 | 7 |
Notepad case | Pacific Base | 12 | 520 | 32 | 2 | 15 | 14 |
Definitions:
CRC = Current Replacement Cost
SP = Selling Price
DISPOSAL = Costs of Completion and Disposal
NPM = Normal Profit Margin
Required
- a. Conduct a lower-of-cost-or-market test for All-Kinds-of-Cases assuming that it uses the total inventory approach for LCM computations.
- b. Conduct a lower-of-cost-or-market test for Ail-Kinds-of-Cases assuming that it uses the individual-item approach for LCM computations.
- c. Conduct a lower-of-cost-or-market test for AII-Kinds-of-Cases assuming that it uses the group-by-group approach for LCM computations.
- d. Prepare the
journal entry needed to adjust All-Kinds of Cases s inventory to a lower-of-cost-or-market (LCM) basis assuming that LCM is applied to total inventory groups All-Kinds of Cases uses the indirect approach to record any adjustments to LCM
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What will be the correct answer for weight average cost method for ending inventory and cost of goods sold?
MusicPlace specializes in sound equipment. Company records indicate the following data for a line of speakers
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Requirement 1. Determine the amounts that MusicPlace should report for cost of goods sold and ending inventory two ways: a. FIFO and b. LIFO (MusicPlace uses a perpetual inventory system.)
Start by determining the amounts that MusicPlace should report for cost of goods sold and ending inventory under a FIFO
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Harbor Company uses a periodic inventory system. The company’s records show the beginning inventory of product no. T-12 on January 1 and the purchases of this item during the current year to be as follows:
Date
Purchases
Units
Unit cost
Total cost
January 1
Beginning inventory
800
11.25
9,000
February 23
Purchase
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April 20
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May 4
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3,800
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46,398
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10.64
11,704
Totals
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A physical count indicates 1,500 units in inventory at year-end.
Determine the cost of the ending inventory based on each of the following methods of. Inventory valuation
Average cost method
FIFO
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Harbor Company uses a periodic inventory system. The company’s records show the beginning inventory of product no. T-12 on January 1 and the purchases of…
Chapter 10 Solutions
Intermediate Accounting (2nd Edition)
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