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Inventory:
Inventory refers to the stock or goods which will be sold in the near future and thus is an asset for the company. It comprises of the raw materials which are yet to be processed, the stock which is still going through the process of production and it also includes completed products that are ready for sale. Thus inventory is the biggest and the important source of income and profit for the business.
Perpetual Inventory System:
In perpetual inventory system there is a continuous recording of transactions as and when they take place that is purchase and sale transactions are recorded whenever they occur.
Cost of Goods Available for Sale:
It basically includes the cost of inventory which is ready for sale within an accounting period. It mainly includes the cost of beginning inventory as well as the stock purchased in that year and the production within that period (if any).
Cost of Goods Sold:
Cost of goods sold is the total expenses or the cost incurred by the business during the process of manufacturing of goods and is directly related to the production. It generally includes the cost of raw material, labor and other
Gross Profit:
The profit made after subtracting or debiting the costs related to the goods sold from the total revenue earned or made through sales in a fiscal year is the gross profit.
First in First out:
In case of first in, first out method, also known as FIFO method, the inventory which was bought first will also be the first one to be taken out.
Last in First out:
In case of last in, first out, also known as LIFO method, the inventory which was bought in the last will be taken out first.
Weighted Average Cost Method:
In this method the weighted average cost is evaluated after any purchases have been made and transactions are recorded as when purchase or sales take place.
Specific Identification Method:
Under this method, there is a continuous tracking of the inventory and the inventory cost at the time of purchase on the basis of unique identity which thus helps in the valuation of the ending inventory as well as the cost of goods sold. This method is used generally when the company is involved in limited expensive goods which are easily identifiable.
To compute: 1. Cost of goods available for sale and number of units available for sale.
2. Number of units in ending inventory.
3. Cost of ending inventory under the following methods
- (a) FIFO
(b)LIFO
(c) Weighted average
(d) Specific identification
4. Gross profit for each of the four methods in part
5. The inventory costing method suitable incase of bonus earned on gross profit.
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Chapter 5 Solutions
FINANCIAL AND MANAGERIAL ACCOUNTING
- Wilson owned equipment with an estimated life of 10 years when the equipment was acquired for an original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2023. On January 1, 2023, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years. On April 1, 2023, Simon Company, a 90% owned subsidiary of Wilson Company, bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date. The following data are available pertaining to Simon's income and dividends declared: 2023 2024 2025 Net income $ 100,000 $ 120,000 $ 130,000 Dividends declared 40,000 50,000 60,000 Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, compute Wilson’s share of income from Simon for consolidation for 2025. Multiple Choice $117,000 $118,825 $115,000 $118,800…arrow_forwardWhat is the amount of Everett's claims of this financial accounting question?arrow_forwardi need correct solution this question general accountingarrow_forward
- Can you help me with accounting questionsarrow_forwardOn January 1, 2023, Smeder Company, an 80% owned subsidiary of Collins, Incorporated, transferred equipment with a 10-year life (six of which remain with no salvage value) to Collins in exchange for $84,000 cash. At the date of transfer, Smeder’s records carried the equipment at a cost of $120,000 less accumulated depreciation of $48,000. Straight-line depreciation is used. Smeder reported net income of $28,000 and $32,000 for 2023 and 2024, respectively. All net income effects of the intra-entity transfer are attributed to the seller for consolidation purposes. Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, what amount of this gain should be recognized for consolidation purposes for 2023? Multiple Choice $1,200 $12,000 $9,600 $8,400 $2,000arrow_forwardStep by step answerarrow_forward
- General Accounting problemarrow_forwardwhat is the equity at the end of the year?arrow_forwardWebb Company purchased 90% of Jones Company for $990,000 when the book value of Jones was $1,000,000. Jones currently has 100,000 shares outstanding and a book value of $1,200,000. Jones sells 20,000 shares of previously unissued shares of its common stock to outside parties for $10 per share. What is the new percent ownership of Webb in Jones after the stock issuance? Multiple Choice 60% 75% 90% 80% 64%arrow_forward
- A parent company owns a 70% interest in a subsidiary whose stock has a valuation basis of $27 per share. On the last day of the year, the subsidiary issues new shares for $27 per share, and the parent buys its 70% interest in the new shares. Which of the following statements is true? Multiple Choice Since the sale was made at the end of the year, the parent’s investment account is not affected. Since the shares were sold for the same per share amount as the adjusted subsidiary value per share, and the parent bought 70% of the shares, the parent’s investment account is not affected except for the total acquisition amount for the new shares. Since the shares were sold for the same per share amount as the adjusted subsidiary value per share, the parent’s investment account must be decreased. None of these answer choices are correct. Since the shares were sold for the same per share amount as the adjusted subsidiary value per share, the parent’s investment…arrow_forwardCompute Ovitz Corporation's dividend yield during 2023 of this financial accounting questionarrow_forwardgeneral accountingarrow_forward
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