Financial Accounting
9th Edition
ISBN: 9781259222139
Author: Robert Libby, Patricia Libby, Frank Hodge Ch
Publisher: McGraw-Hill Education
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Chapter 7, Problem 7.1E
To determine
Explain the basis of the treatment of each of the preceding items.
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Based on the information, Determine the adjusted balances of Inventory,Accounts receivable,Sales,Purchases and net income.
Chapter 7 Solutions
Financial Accounting
Ch. 7 - Why is inventory an important item to both...Ch. 7 - Prob. 2QCh. 7 - Prob. 3QCh. 7 - Prob. 4QCh. 7 - Prob. 5QCh. 7 - The chapter discussed tour inventory costing...Ch. 7 - Prob. 7QCh. 7 - Contrast the effects of LIFO versus FIFO on...Ch. 7 - Contrast the income statement effect of LIFO...Ch. 7 - Prob. 10Q
Ch. 7 - Explain briefly the application of the LCM concept...Ch. 7 - Prob. 12QCh. 7 - Consider the following information: ending...Ch. 7 - The inventory costing method selected by a company...Ch. 7 - Which of the following is not a component of the...Ch. 7 - Consider the following information: beginning...Ch. 7 - Consider the following information: beginning...Ch. 7 - An increasing inventory turnover ratio a....Ch. 7 - If the ending balance in accounts payable...Ch. 7 - Which of the following regarding the lower of cost...Ch. 7 - Which inventory method provides a better matching...Ch. 7 - Which of the following is false regarding a...Ch. 7 - Prob. 7.1MECh. 7 - Recording the Cost of Purchases for a Merchandiser...Ch. 7 - Identifying the Cost of Inventories for a...Ch. 7 - Inferring Purchases Using the Cost of Goods Sold...Ch. 7 - Prob. 7.5MECh. 7 - Matching Inventory Costing Method Choices to...Ch. 7 - Reporting Inventory under Lower of Cost or Market...Ch. 7 - Determining the Effects of Inventory Management...Ch. 7 - Prob. 7.9MECh. 7 - Prob. 7.1ECh. 7 - Inferring Missing Amounts Based on Income...Ch. 7 - Prob. 7.3ECh. 7 - Inferring Merchandise Purchases Abercrombie and...Ch. 7 - Calculating Ending Inventory and Cost of Goods...Ch. 7 - Calculating Ending Inventory and Cost of Goods...Ch. 7 - Analyzing and Interpreting the Financial Statement...Ch. 7 - Analyzing and Interpreting the Financial Statement...Ch. 7 - Evaluating the Choice among Three Alternative...Ch. 7 - Evaluating the Choice among Three Alternative...Ch. 7 - Prob. 7.11ECh. 7 - Reporting Inventory at Lower of Cost or Market...Ch. 7 - Prob. 7.13ECh. 7 - Prob. 7.14ECh. 7 - Prob. 7.15ECh. 7 - Prob. 7.16ECh. 7 - Prob. 7.17ECh. 7 - Prob. 7.18ECh. 7 - Prob. 7.19ECh. 7 - Prob. 7.20ECh. 7 - (Chapter Supplement A) Analyzing the Effects of a...Ch. 7 - (Chapter Supplement B) FIFO and LIFO Cost of Goods...Ch. 7 - (Chapter Supplement C) Recording Sales and...Ch. 7 - Analyzing Items to Be Included in Inventory Travis...Ch. 7 - Prob. 7.2PCh. 7 - Evaluating Four Alternative Inventory Methods...Ch. 7 - Prob. 7.4PCh. 7 - Evaluating the LIFO and FIFO Choice When Costs Are...Ch. 7 - Evaluating the Income Statement and Cash Flow...Ch. 7 - Evaluating the Effects of Manufacturing Changes on...Ch. 7 - Evaluating the Choice between LIFO and FIFO Based...Ch. 7 - Prob. 7.9PCh. 7 - (Chapter Supplement A) Analyzing LIFO and FIFO...Ch. 7 - Prob. 7.1APCh. 7 - Evaluating Four Alternative Inventory Methods...Ch. 7 - Evaluating the UFO and FIFO Choice When Costs Are...Ch. 7 - Prob. 7.4APCh. 7 - Prob. 7.1CONCh. 7 - Finding Financial Information Refer to the...Ch. 7 - Finding Financial Information Refer to the...Ch. 7 - Comparing Companies within an Industry Refer to...Ch. 7 - Prob. 7.4CPCh. 7 - Using Financial Reports: Interpreting Effects of...Ch. 7 - Making a Decision as a Financial Analyst: Analysis...Ch. 7 - Evaluating an Ethical Dilemma: Earnings, Inventory...
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- Gross Profit Shelly Corporation is an importer and wholesaler. Its merchandise is purchased from several suppliers and is warehoused by Shelly until sold to consumers. In conducting her audit for the year ended June 30, 2019, the corporations CPA determined that the system of internal control was good. Accordingly, she observed the physical inventory at an interim date, May 31, 2019, instead of at year-end. The CPA obtained the following information from the general ledger: The CPAs audit disclosed the following information: Required: In audit engagements in which interim physical inventories are observed, a frequently used auditing procedure is to test the reasonableness of the year-end inventory by the application of gross profit ratios. Prepare in good form the following schedules: 1. Computation of the gross profit ratio for 11 months ended May 31, 2019 2. Computation by the gross profit ratio method of cost of goods sold during June 2019 3. Computation by the gross profit ratio method of June 30, 2019 inventoryarrow_forwardYour audit client presented the following information on December 31, 2018: Net purchases (all on account) — P2,400,000; Inventory, December 31, 2018 — P350,000. The audited balance of inventory on December 31, 2017 is P260,000. Additional information:A. The December 31, 2018 inventory balance is based on the inventory count conducted on the entity's warehouse. All inventories in the warehouse at that date were included, while inventories not in the warehouse were not included in the count. B. A purchase of inventory for P6,000 was recorded on December 28, 2018 and the goods are still in transit as of December 31. The related freight term is FOB Shipping Point. C. Goods (costing P20,000) consigned by your client to another entity are not yet sold as of December 31, 2018. No journal entry was prepared by your client upon the transfer of goods to the consignee. D. Goods costing P8,000 were sold for P15,000 on December 28, 2018. The freight term is FOB Shipping Point.E. A purchase of…arrow_forwardThe auditor established the following information relating to the inventory count and product lines of JBU. There was no product movement on the day of the count. The loading dock is part of Warehouse A for the purposes of the count. All product lines within each storage area are on the warehouse maps. The warehouse map is reflective of the warehouse on the day of the count. Inventory values in the perpetual inventory listing are the most recent purchase price. Materiality for year-end audit $8,000 Performance materiality: $5,000 Complete the inventory tasks below by using the information provided in the exhibits: In column B, quantify the required adjustment, if any, to the product line in the perpetual inventory system. Enter increases to the perpetual inventory listing as positive whole dollars. Enter decreases to the perpetual inventory listing as negative whole do If no adjustment to the perpetual inventory listing is required, enter a zero (0).arrow_forward
- Reggie Company has just completed a physical inventory count at year-end, December 31, 2020. Only the items on the shelves, in storage, and in the receiving area were counted and costed on a FIFO basis. The inventory amounted to $65,000. During the audit, the auditor developed the following additional information: a. Goods costing $750 were being used by a customer on a trial basis and were excluded from the inventory count at December 31, 2020. b. Goods costing $900 were in transit to Reggie on December 31, 2020, with terms F.O.B. destination (explained below). Because these goods had not arrived, they were excluded from the physical inventory count. c. On December 31, 2020, goods in transit to customers, with terms F.O.B. shipping point, amounted to $1,300 (the expected delivery date was January 10, 2021), Because the goods had been shipped, they were excluded from the physical inventory count. d. On December 28, 2020, a customer purchased goods for $2,650 cash and left them "for…arrow_forwardThe Swifty Company has just completed a physical inventory count at year end, December 31, 2022. Only the items on the shelves, in storage, and in the receiving area were counted and costed on the FIFO basis. The inventory amounted to $78,400. During the audit, the independent CPA discovered the following additional information: (a) (b) (c) (d) (e) (f) There were goods in transit on December 31, 2022, from a supplier with terms FOB destination, costing $9,600. Because the goods had not arrived, they were excluded from the physical inventory count. On December 27, 2022, a regular customer purchased goods for cash amounting to $900 and had them shipped to a bonded warehouse for temporary storage on December 28, 2022. The goods were shipped via common carrier with terms FOB shipping point. The customer picked the goods up from the warehouse on January 4, 2023. Swifty Company had paid $450 for the goods and, because they were in storage, Swifty included them in the physical inventory…arrow_forwardPLEASE ANSWER ASAP Problem No. 6 In conducting your audit of AACA Corporation, a company engaged in import and wholesale business, for the year ended December 31, 2022, you determined that its internal control system was good. Accordingly, you observed the physical inventory at an interim date, November 30, 2022 instead of at December 31, 2022. You obtained the following information from the company’s general ledger. Sales for eleven months ended November 30, 2022 P1,120,000 Sales for the year ended December 31, 2022 1,536,000 Purchases for eleven months ended November 30, 2022 (before audit adjustments) 856,000 Purchases for the year ended December 31, 2022 1,280,000 Inventory, January 1, 2022 140,000 Physical inventory, November 30, 2022 220,000 Your audit disclosed the following additional information. Shipments costing P12,000 were received in November and included in the physical inventory but recorded as December purchases. Deposit of…arrow_forward
- Assume that in an annual audit of Wildhorse Inc. at December 31, 2025, you find the following transactions near the closing date. Assuming that each of the amounts is material, state whether the merchandise should be included in the client's inventory. 1. 2. 3. 4. 5. Transactions A special machine, fabricated to order for a customer, was finished and specifically segregated in the back part of the shipping room on December 31, 2025. The customer was billed on that date and the machine excluded from inventory although it was shipped on January 4, 2026. Merchandise costing $5,880 was received on January 3, 2026, and the related purchase invoice recorded January 5. The invoice showed the shipment was made on December 29, 2025, f.o.b. destination. A packing case containing a product costing $7,140 was standing in the shipping room when the physical inventory was taken. It was not included in the inventory because it was marked "Hold for shipping instructions." Your investigation revealed…arrow_forwardVinubhaiarrow_forwardSabre Company has just completed a physical inventory count at year-end, December 31 of the current year. Only the items on the shelves, in storage, and in the receiving area were counted and costed on a FIFO basis. The inventory amounted to $102,000. During the audit, the independent CPA developed the following additional information: a. Goods costing $410 were being used by a customer on a trial basis and were excluded from the inventory count at December 31 of the current year. b. On December 28 of the current year, a customer purchased goods for cash amounting to $3,600 and left them "for pickup on January 3 of next year." Sabre Company had paid $2,500 for the goods and, because they were on hand, included the latter amount in the physical inventory count. c. Goods in transit on December 31 of the current year, from a supplier, with terms FOB destination (explained in the "Required" section), cost $2,000. Because these goods had not yet arrived, they were excluded from the physical…arrow_forward
- The estimated inventory balance on December 31 would bearrow_forwardIn your audit of Thomas Taylor Company, you find that a physical inventory on December 31, 2025, showed merchandise with a cost of $403,730 was on hand at that date. You also discover the following items were all excluded from the $403,730. 1. 2. 3. 4. 5. Merchandise of $61,080 which is held by Taylor on consignment. The consignor is the Max Suzuki Company. Merchandise costing $35,400 which was shipped by Taylor f.o.b. destination to a customer on December 31, 2025. The customer was expected to receive the merchandise on January 6, 2026. Merchandise costing $43,270 which was shipped by Taylor f.o.b. shipping point to a customer on December 29, 2025. The customer was scheduled to receive the merchandise on January 2, 2026. Merchandise costing $84,630 shipped by a vendor f.o.b. destination on December 30, 2025, and received by Taylor on January 4, 2026. Merchandise costing $47,400 shipped by a vendor f.o.b. shipping point on December 31, 2025, and received by Taylor on January 5, 2026.…arrow_forwardAssume that in an annual audit of Pharoah Inc. at December 31, 2020, you find the following transactions near the closing date.Assuming that each of the amounts is material, state whether the merchandise should be included in the client’s inventory. Transactions 1. A special machine, fabricated to order for a customer, was finished and specifically segregated in the back part of the shipping room on December 31, 2020. The customer was billed on that date and the machine excluded from inventory although it was shipped on January 4, 2021. select an option IncludeDo not include 2. Merchandise costing $5,180 was received on January 3, 2021, and the related purchase invoice recorded January 5. The invoice showed the shipment was made on December 29, 2020, f.o.b. destination. select an option IncludeDo not include 3. A packing case containing a…arrow_forward
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