Financial Accounting
4th Edition
ISBN: 9781259307959
Author: J. David Spiceland, Wayne M Thomas, Don Herrmann
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Question
Chapter 6, Problem 6.8APEM
(1)
To determine
The amount that Person E will calculate for ending inventory and cost of goods sold using FIFO.
(2)
To determine
To compute: The amount that Person E will calculate for ending inventory and cost of goods sold using FIFO, assuming 50 units are there in ending inventory:
(3) and (4)
To determine
The Effect of error in inventory in the financial items in 2018 (Current year) and 2019 (Next Year):
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Pick only one option:
The owner of Tommy's Technicians has found that his shop is losing money and he is in jeopardy of going out of business. Sales have remained constant for quite some time and now he is looking at ways to cut expenses to stay in business. Which of the following expenses is his best choice to try to immediately reduce and save him meaningful dollars so he can remain in business? (Hint: First consider which ones he has ultimate control over?)
Rent expense
Utilities expense
Payroll expense
Shop insurance expense
Advertising expense
A local pharmacy company has been in business for many years. Recently the company got into some trouble because investors wanted to know why the profits were trending downward. So the management of this company decided they were going to change a few things. The management has decided that the new policy for recognizing revenues for the pharmacy businesses will be when the customer drops off the prescription. The controller, William asked about what if the customer does not pick up their prescription. The management stated that we don’t get a lot of people that don’t pick up their prescriptions. Management states this will recognize our revenue quicker and hopefully this will increase our cash flow. We must keep our investors happy. William, the controller has come to you as an outside CPA to research this change in revenue recognition.
Please explain the 5-step revenue recognition policy that is now GAAP.
Demonstrate how this follows this revenue recognition rule.
Please provide…
Nancy Thomas is the chief accountant at Company C, a manufacturer of medical equipment. The company is under pressure from creditors to increase its earnings. Shortly after the end of the fiscal year, the company performed a physical count of the inventory. A significant amount of inventory shrinkage was discovered. The amount is so large that it will result in a significant drop in earnings this period. The decrease in earnings will hurt the company's chance at getting a much needed loan at a low interest rate. Nancy is thinking of not reporting the shrinkage until next period, after the company gets its loan.
What should Nancy do in this situation? Why?
Chapter 6 Solutions
Financial Accounting
Ch. 6 - 1.What is inventory? Where in the financial...Ch. 6 - Prob. 2RQCh. 6 - What is the difference among raw materials...Ch. 6 - Prob. 4RQCh. 6 - Prob. 5RQCh. 6 - What is a multiple-step income statement? What...Ch. 6 - Cheryl believes that companies report cost of...Ch. 6 - What are the three primary cost flow assumptions?...Ch. 6 - 9.Which cost flow assumption generally results in...Ch. 6 - Prob. 10RQ
Ch. 6 - Prob. 11RQCh. 6 - 12.Explain how LIFO generally results in lower...Ch. 6 - Prob. 13RQCh. 6 - Explain how freight charges, purchase returns, and...Ch. 6 - Explain the method of reporting inventory at lower...Ch. 6 - 16.How is cost of inventory determined? How is net...Ch. 6 - 17.Describe the entry to adjust from cost to net...Ch. 6 - Prob. 18RQCh. 6 - Prob. 19RQCh. 6 - How is gross profit calculated? What is the gross...Ch. 6 - 21.Explain how the sale of inventory on account is...Ch. 6 - Prob. 22RQCh. 6 - Prob. 23RQCh. 6 - Prob. 24RQCh. 6 - Understand terms related to types of companies...Ch. 6 - Prob. 6.2BECh. 6 - Calculate cost of goods sold (LO62) At the...Ch. 6 - Prob. 6.4BECh. 6 - Calculate ending inventory and cost of goods sold...Ch. 6 - Calculate ending inventory and cost of goods sold...Ch. 6 - Calculate ending inventory and cost of goods sold...Ch. 6 - Prob. 6.8BECh. 6 - Identify financial statement effects of FIFO and...Ch. 6 - Prob. 6.10BECh. 6 - Record freight charges for inventory using a...Ch. 6 - Record purchase returns of inventory using a...Ch. 6 - Prob. 6.13BECh. 6 - Prob. 6.14BECh. 6 - Prob. 6.15BECh. 6 - Prob. 6.16BECh. 6 - Prob. 6.17BECh. 6 - Prob. 6.18BECh. 6 - Record purchase returns of inventory using a...Ch. 6 - Refer to the information in BE613, but now assume...Ch. 6 - Prob. 6.21BECh. 6 - Prob. 6.22BECh. 6 - Calculate cost of goods sold (LO62) Russell Retail...Ch. 6 - Prob. 6.2ECh. 6 - Prob. 6.3ECh. 6 - Calculate inventory amounts when costs are rising...Ch. 6 - Calculate inventory amounts when costs are...Ch. 6 - Record Inventory transactions using o perpetual...Ch. 6 - Record inventory purchase and purchase return...Ch. 6 - Prob. 6.8ECh. 6 - Prob. 6.9ECh. 6 - Prob. 6.10ECh. 6 - Record transactions using a perpetual system...Ch. 6 - Record transactions using a perpetual system...Ch. 6 - Calculate inventory using lower of cost and net...Ch. 6 - Prob. 6.14ECh. 6 - Calculate cost of goods sold, the inventory...Ch. 6 - Prob. 6.16ECh. 6 - Prob. 6.17ECh. 6 - Prob. 6.18ECh. 6 - Record inventory purchases and sales using a...Ch. 6 - Mulligan Corporation purchases inventory on...Ch. 6 - Complete the accounting cycle using Inventory...Ch. 6 - Calculate ending inventory and cost of goods sold...Ch. 6 - Prob. 6.2APCh. 6 - Prob. 6.3APCh. 6 - Prob. 6.4APCh. 6 - Calculate ending inventory end cost of goods sold...Ch. 6 - Record transactions using a perpetual system,...Ch. 6 - Prob. 6.7APCh. 6 - Prob. 6.8APCh. 6 - Record transactions and prepare a partial income...Ch. 6 - Prob. 6.10APCh. 6 - Calculate ending inventory and cost of goods sold...Ch. 6 - Prob. 6.2BPCh. 6 - Prob. 6.3BPCh. 6 - Prob. 6.4BPCh. 6 - Prob. 6.5BPCh. 6 - Record transactions using a perpetual system,...Ch. 6 - Prob. 6.7BPCh. 6 - Use the inventory turnover retio end gross profit...Ch. 6 - Record transactions and prepare a partial income...Ch. 6 - Determine the effects of inventory errors using...Ch. 6 - Great Adventures (This is a continuation of the...Ch. 6 - Prob. 6.2APFACh. 6 - Prob. 6.3APFACh. 6 - Comparative Analysis American Eagle Outfitters,...Ch. 6 - Prob. 6.5APECh. 6 - Prob. 6.6APIRCh. 6 - Written Communication You have just been hired as...Ch. 6 - Prob. 6.8APEM
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- BeneMart, a large national retail chain, is nearing its fiscal year-end. It appears that the company is not going to hit its revenue and net income targets. The company's marketing manager, Ed Mellon, suggests running a promotion selling $50 gift cards for $45. He believes that this would be very popular and would enable the company to meet its targets for revenue and net income. What do you think of this idea?arrow_forwardOn March 3, 2016, Zad Company was established to produce and sell plastic products. The company produces a full line of plastic products included customized orders. The Chief Executive Officer of the company is working hard to enhance profitability and liquidity. Recently, you have been hired as the Financial Director of the company. 1. On March 8, 2020, the Chief Financial Officer stated to you that she wishes to reduce the company's investment in current assets since those assets provide little, if any, return to the firm. How would you respond to this statement? 2. On September 17, 2020, the Chief Financial Officer stated to you that as long as the company maintains a positive cash balance, why is it essential to review the firm's cash flows? 3. On January 5, 2021, the Chief Financial Officer wishes to expand the company's operations and are trying to determine the amount of debt financing the company should obtain versus the amount of equity financing that should be raised. The…arrow_forwardAerotech Corp is a multinational company that offers various products to its customers. The company provides discounts to its clients as part of its sales strategy. However, accounting for these discounts can be complex due to different types of discounts and the timing of recognition. Aerotech Corp recently offered a volume-based discount to one of its major customers, which resulted in a significant reduction in revenue for the current financial year. The finance team is struggling to account for this discount correctly. Can you provide a comprehensive step-by-step explanation of how Aerotech Corp should account for this volume-based discount in its financial statements in accordance with the Generally Accepted Accounting Principles (GAAP)?arrow_forward
- Thom Lutz started a retail clothing business two years ago. Lutz’s first year was very successful, but sales dropped 50 percent in the second year. A friend who is a business consultant analyzed Lutz’s business and came up with two basic reasons for the decline in sales: (1) Lutz has been placing orders late in each season, and (2) shipments of clothing have been arriving late and in poor condition. What measures can Lutz take to improve his business and persuade customers to return?arrow_forwardGolf Challenge Corp. is a retail sports store carrying golf apparel and equipment. The store is at the end of its second year of operation and is struggling. A major problem is that its cost of inventory has continually increased in the past two years. In the first year of operations, the store assigned inventory costs using LIFO. A loan agreement the store has with its bank, its prime source of financing, requires the store to maintain a certain profit margin and current ratio. The store’s owner is currently looking over Golf Challenge’s preliminary financial statements for its second year. The numbers are not favorable. The only way the store can meet the financial ratios agreed on with the bank is to change from LIFO to FIFO. The store originally decided on LIFO because of its tax advantages. The owner recalculates ending inventory using FIFO and submits those numbers and statements to the loan officer for the required bank review. The owner thankfully reflects on the available…arrow_forwardPharoah Inc. developed a new sales gimmick to help sell its inventory of new cars. Because many new car buyers need financing. Pharoah offered a low down payment at the time of purchase and low car payments for the first year after purchase. It believes that this promotion will bring in some new buyers. On January 1, 2023, a customer purchased a new $34,900 automobile, making a down payment of $1,500. The customer signed a note indicating that the annual rate of interest would be 8% and that quarterly payments would be made over 3 years. For the first year, Pharoah required a $490 quarterly payment to be made on April 1, July 1, October 1, and January 1, 2024. After this one-year period. the customer was required to make regular quarterly payments that would pay off the loan as of January 1, 2026. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. Prepare a note amortization schedule for the first year. (Round…arrow_forward
- Ellie Ice-cream’s owner is disturbed by the poor profit performance of his ice cream counter. He has prepared the following profit analyses for the year just ended: The owner is thinking the elimination of this counter. If it is eliminated then: Depreciation of counter equipment is avoidable The supervisory salaries is avoidable The insurance expense is unavoidable The depreciation of building unavoidable The general overhead is unavoidable Required:a) Should the company eliminate the counter or not? Fill in the table and justify your answer. b) Mention at least three relevant costs.arrow_forward1. Calculate the net profit increase or (decrease) from accepting the special order. 2. Assume that present sales will not be affected. Should the order be accepted from a financial point of view (i.e., is it profitable)?arrow_forwardYou are a financial adviser with a client in the wholesale produce business that just completed its first year of operations. Due to weather conditions, the cost of acquiring produce to resell has escalated during the latter part of this period. Your client, Javonte Gish, mentions that because her business sells perishable goods, she has striven to maintain a FIFO flow of goods. Although sales are good, the increasing cost of inventory has put the business in a tight cash position. Gish has expressed concern regarding the ability of the business to meet income tax obligations. Required Prepare a memorandum that identifies, explains, and justifies the inventory method you recommend that Ms. Gish adopt.arrow_forward
- Good-Deal Inc. developed a new sales gimmick to help sell its inventory of new automobiles. Because many new car buyers need financing, Good-Deal offered a low downpayment and low car payments for the first year after purchase. It believes that this promotion will bring in some new buyers. On January 1, 2020, a customer purchased a new $33,000 automobile, making a downpayment of $1,000. The customer signed a note indicating that the annual rate of interest would be 8% and that quarterly payments would be made over 3 years. For the first year, Good-Deal required a $400 quarterly payment to be made on April 1, July 1, October 1, and January 1, 2021. After this one-year period, the customer was required to make regular quarterly payments that would pay off the loan as of January 1, 2023. Instructions a. Prepare a note amortization schedule for the first year. b. Indicate the amount the customer owes on the contract at the end of the first year. c. Compute the amount of the new…arrow_forwardKatie Murphy is preparing for a meeting with her banker. Her business is finishing its fourth year of operations. In the first year, it had negative cash flows from operations. In the second and third years, cash flows from operations were positive. However, inventory costs rose significantly in Year 4, and cash flows from operations will probably be down 25%. Murphy wants to secure a line of credit from her banker as a financing buffer. From experience, she knows the banker will scrutinize operating cash flows for Years 1 through 4 and will want a projected number for Year 5. Murphy knows that a steady progression upward in operating cash flows for Years 1 through 4 will help her case. She decides to use her discretion as owner and considers several business actions that will turn her operating cash flow in Year 4 from a decrease to an increase. Required 1. Identify two business actions Murphy might take to improve cash flows from operations. 2. Comment on the ethics and possible…arrow_forwardTop managers of Movie Street are alarmed by their operating losses. They are considering dropping the DVD product line. Company accountants have prepared the following analysis to help make this decision: Assume that Movie Street can avoid $39,000 of fixed costs by dropping the DVD product line (these costs are direct fixed costs of the DVD product line). E (Click the icon to view the analysis.) Prepare a differential analysis to show whether Movie Street should stop selling DVDS. (Enter decreases to revenues with a parentheses or minus sign.) Expected decrease in revenues Data Table Expected decrease in costs: Variable costs Movie Street Fixed costs Income Statement Expected decrease in total costs For the Year Ended December 31, 2018 Expected | in operating income Total Blu-ray Discs DVD Discs Decision: Net Sales Revenue $ 424,000 $ 300,000 $ 124,000 248,000 153,000 95,000 Variable Costs Contribution Margin 176,000 147,000 29,000 Fixed Costs: Manufacturing 130,000 74,000 56,000…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Individual Income Taxes
Accounting
ISBN:9780357109731
Author:Hoffman
Publisher:CENGAGE LEARNING - CONSIGNMENT
Pricing Decisions; Author: Rutgers Accounting Web;https://www.youtube.com/watch?v=rQHbIVEAOvM;License: Standard Youtube License