Principles of Financial Accounting.
24th Edition
ISBN: 9781260158625
Author: Wild
Publisher: MCG
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Chapter 6, Problem 9QS
Perpetual: Inventory costing with FIFO P1
A company reports the following beginning inventory and two purchases for the month of January. On January 26, the company sells 350 units. Ending inventory at January 31 totals 150 units.
| Units | Unit Cost | |
| Beginning Inventory on January 1 | 320 | $3.00 |
| Purchase on January 9 | 80 | 3.20 |
| Purchase on January 25 | 100 | 3.34 |
Required
Assume the perpetual inventory system is used. Determine the costs assigned to ending inventory when costs are assigned based on the FIFO method. (Round per unit costs and inventory amounts to cents.)
QS 6-9A
Periodic: Inventory costing with weighted average P3
Refer to the information in QS 6-4 and assume the periodic inventory system is used. Determine the costs assigned to ending inventory when costs are assigned based on the weighted average method. (Round per unit costs and inventory amounts to cents.)
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JH, Inc., is a calendar year, accrual basis corporation with Joe as its sole shareholder (basis in his stock is $90,000). On January 1 of the current year, JH Corporation has accumulated E & P of $200,000. Before considering the effect of the distribution described below, the corporation’s current E & P is $50,000. On November 1, JH distributes an office building to Joe. The office building has an adjusted basis of $80,000 (fair market value of $100,000) and is subject to a mortgage of $110,000. Assume that the building has been depreciated using the ADS method for both income tax and E & P purposes. What are the tax consequences of the distribution to JH and to Joe? (In your answer, be sure to describe the effects on taxable income for both JH and Joe, the impact of the distribution on JH’s E & P, and Joe’s basis in the building.)
Joe is the sole shareholder of JH Corporation. Joe sold his stock to Ethan on October 31 for $150,000. Joe’s basis in JH stock was $50,000 at the start of the year. JH distributed land to Joe immediately before the sale. JH’s basis in the land was $20,000 (fair market value of $25,000). On December 31, Ethan received a $75,000 cash distribution from JH. During the year, JH has $20,000 of current E & P and its accumulated E & P balance on January 1 is $10,000. Which of the following statements is true?
a. Joe recognizes a $110,000 gain on the sale of his stock. b. Joe recognizes a $100,000 gain on the sale of his stock. c. Ethan receives $5,000 of dividend income.d. Joe receives $20,000 of dividend income. e. None of the above.
Chapter 6 Solutions
Principles of Financial Accounting.
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