Intermediate Accounting Plus Mylab Accounting With Pearson Etext -- Access Card Package (2nd Edition)
2nd Edition
ISBN: 9780134833101
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Chapter 10, Problem 10.3P
LIFO, Conversion to FIFO. The Outsider Company, Inc. provided the following information regarding its inventory for the year ended December 31, 2019. It made all of the purchases before it had any sales transactions for the year.
| Description | LIFO | FIFO | ||
| Beginning inventory; | 8,000@ $6 | $48,000 | 4,000 @ $7 | $ 28,000 |
| January 1, 2010 | 8,000 @ $7 | 56,000 | 12,000 @ $8 | 96,000 |
| Total beginning inventory | 16,000 units | $ 104,000 | 16,000 units | $124,000 |
| Purchases | 14,000@ $9 | 126,000 | 14,000 @$9 | 126,000 |
| Cost of goods available | 30,000 units | $ 230,000 | 30,000 units | $250,000 |
| Ending inventory | 6,000 @ $8 | 36,000 | 6,000 @ $9 | 54,000 |
| Cost of goods sold | 24,000 units | $ 194,000 | 24,000 units | $196,000 |
Required
- a. Compute the LIFO reserve at the beginning of the year (i.e., at December 31, 2018).
- b. Compute the LIFO reserve at the end of the year (i.e., at December 31, 2019)
- c. Illustrate how the firm can use the LIFO reserve to convert ending inventory from the LIFO to the FIFO basis for Doth years (i.e., 2018 and 2019).
- d. Illustrate how the firm can use the LITO reserve to convert the LIFO cost of goods sold to the FIFO cost of goods sold for 2019
- e. Describe the conditions that indicate that there is a LIFO liquidation tor 2019.
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1.
Record the proper journal entry for each transaction.
2.
By the end of January, was manufacturing overhead overallocated or underallocated? By how much?
Rocky River Fast Lube does oil changes on vehicles in 15 minutes or less. The variable cost associated with each oil change is $12 (oil, filter, and 15 minutes of employee time). The fixed costs of running the shop are $8,000 each month (store manager salary, depreciation on shop and equipment, insurance, and property taxes). The shop has the capacity to perform 4,000 oil changes each month.
The formula to calculate the amount of manufacturing overhead to allocate to jobs is:
Question content area bottom
Part 1
A.
predetermined overhead rate times the actual amount of the allocation base used by the specific job.
B.
predetermined overhead rate divided by the actual allocation base used by the specific job.
C.
predetermined overhead rate times the estimated amount of the allocation base used by the specific job.
D.
predetermined overhead rate times the actual manufacturing overhead used on the specific job.
Chapter 10 Solutions
Intermediate Accounting Plus Mylab Accounting With Pearson Etext -- Access Card Package (2nd Edition)
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