Managerial Accounting (5th Edition)
Managerial Accounting (5th Edition)
5th Edition
ISBN: 9780134128528
Author: Karen W. Braun, Wendy M. Tietz
Publisher: PEARSON
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Chapter 2, Problem 2.43AP

Determine ending inventory balances (Learning Objectives 5)

Unique Displays designs and manufactures displays used in mobile devices. Serious flooding throughout the region affected Unique Displays’ facilities. Inventory was completely ruined, and the company’s computer system, including all accounting records, was destroyed.

Before the disaster recovery specialists clean the buildings, Louise Ditchey, the company controller, is anxious to salvage whatever records she can to support an insurance claim for the destroyed inventory. She is standing in what is left of the Accounting Department with Trent Parker, the cost accountant.

“I didn’t know mud could smell so bad,” Trent says. “What should I be looking for?”

“Don’t worry about beginning inventory numbers.” responds Louise. “We’ll get them from last year’s annual report. We need first-quarter cost data.”

“I was working on the first-quarter results just before the storm hit,” Trent says. “Look, my report’s still in my desk drawer.

But all I can make out is that for the first quarter, direct material purchases were $533,000 and that direct labor, manufacturing overhead (other than indirect materials), and total manufacturing costs to account for were $551,000; $218,000; and $1,491,000, respectively. Wait, and cost of goods available for sale was $1,615,000.”

“Great,” says Louise, “I remember that sales for the period were approximately $1.8 million. Given our gross profit of 30%, that’s all you should need.”

Trent is not sure about that but decides to see what he can do with this information. The beginning inventory numbers are as follows:

  • Raw materials, $75,000
  • Work in process, $226,000
  • Finished goods, $213,000

He remembers several schedules he learned in college that may help him get started.

Requirement

Use exhibits in the chapter to determine the ending inventories of raw materials, work in process, and finished goods. Assume that Raw Materials Inventory contains only direct materials.

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Brad Essary owned a small company that sold garden equipment. The equipment was expensive, and a perpetual system was maintained for control purposes. Even so, lost, damaged, and stolen merchandise normally amounted to 5 percent of the inventory balance. On June 14, Essary's warehouse was destroyed by fire. Just prior to the fire, the accounting records contained a $154,500 balance in the Inventory account. However, inventory costing $11,100 had been sold and delivered to customers but had not been recorded in the books at the time of the fire. The fire did not affect the showroom, which contained inventory that cost $41,200. Required Estimate the amount of inventory destroyed by fire. Inventory destroyed by fire
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6. On June 30, 20X3, a storm damaged a warehouse of ABC Company. The entire inventory and many accounting records stored in the warehouse were completely destroyed. Although the inventory was not insured, a portion could be sold for scrap. Through the use of microfilmed records, the following data are assembled. Inventory, January 1 7,500,000 Purchases, January 1 – June 30 31,500,000 Cash sales, January 1 – June 30 5,000,000 Collection of accounts receivable, January 1 – June 30 45,000,000 Accounts receivable, January 1 3,000,000 Accounts receivable, June 30 4,000,000 Salvage value of inventory 400,000 Gross profit percentage on sales 40% The inventory loss as a result of the storm should be reported at   a.8,400,000 b.8,000,000 c.9,000,000 d.8,600,000

Chapter 2 Solutions

Managerial Accounting (5th Edition)

Ch. 2 - Short Exercises S2-1 Identify types of companies...Ch. 2 - Identify type of company from balance sheets...Ch. 2 - Classify costs by value chain function (Learning...Ch. 2 - Classify costs as direct or indirect (Learning...Ch. 2 - Prime costs Cost objects Product costs Assigned...Ch. 2 - Prob. 2.6SECh. 2 - Classify product costs and period costs (Learning...Ch. 2 - Classify a manufacturers costs (Learning Objective...Ch. 2 - Classify costs incurred by a dairy processing...Ch. 2 - Determine total manufacturing overhead (Learning...Ch. 2 - Prepare a retailers income statement (Learning...Ch. 2 - Compute Cost of Goods Sold for a merchandiser...Ch. 2 - Calculate direct materials used (Learning...Ch. 2 - Compute Cost of Goods Manufactured (Learning...Ch. 2 - Describe other cost terms (Learning Objectives 6...Ch. 2 - Classify costs as fixed or variable (Learning...Ch. 2 - Prob. 2.17SECh. 2 - Classify costs along the value chain for a...Ch. 2 - Classify costs along the value chain for a...Ch. 2 - Value chain and sustainability efforts (Learning...Ch. 2 - Prob. 2.21AECh. 2 - Construct an income statement using product and...Ch. 2 - Work backward to find missing amounts (Learning...Ch. 2 - Prepare a retailers income statement (Learning...Ch. 2 - Compute direct materials used and Cost of Goods...Ch. 2 - Compute Cost of Goods Manufactured and Cost of...Ch. 2 - Continues E2-26A: Prepare income statement...Ch. 2 - Determine whether information is relevant...Ch. 2 - Prob. 2.29AECh. 2 - Classify costs along the value chain for a...Ch. 2 - Classify costs along the value chain for a...Ch. 2 - Value chain and sustainability efforts (Learning...Ch. 2 - Classify and calculate a manufacturers costs...Ch. 2 - Construct an income statement using product and...Ch. 2 - Work backward to find missing amounts (Learning...Ch. 2 - Prob. 2.36BECh. 2 - Compute direct materials used and Cost of Goods...Ch. 2 - Compute Cost of Goods Manufactured and Cost of...Ch. 2 - Continues E2-38B: Prepare income statement...Ch. 2 - Determine whether information is relevant...Ch. 2 - Prob. 2.41BECh. 2 - Classify costs along the value chain (Learning...Ch. 2 - Determine ending inventory balances (Learning...Ch. 2 - Prepare income statements (Learning Objective 5)...Ch. 2 - Prob. 2.45APCh. 2 - Prob. 2.46APCh. 2 - Classify costs along the value chain (Learning...Ch. 2 - Determine ending inventory balances (Learning...Ch. 2 - Prepare income statements (Learning Objective 5)...Ch. 2 - Prob. 2.50BPCh. 2 - Prob. 2.51BPCh. 2 - Calculate operating income (Learning Objective 5)...Ch. 2 - Prob. 2.53ACT
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