Inventory includes raw materials, work-in-process goods and finished products which are held with the purpose of sale. Case 1: T J International Given: TJ International is a manufacturer of specialty building products. T J International’s adapted income statement and information concerning inventories from its annual report is provided in the question statement. (a) To determine how much would income before taxes have been if FIFO costing had been used to value all inventories.

Question

Financing Deficit Stevens Textile Corporation's 2019 financial statements are shown below: Just need the correct LOC? Balance Sheet as of December 31, 2019 (Thousands of Dollars) Cash $ 1,080 Accounts payable $ 4,320 Receivables 6,480 Accruals 2,880 Inventories 9,000 Line of credit 0 Total current assets $16,560 Notes payable 2,100 Net fixed assets 12,600 Total current liabilities $ 9,300 Mortgage bonds 3,500 Common stock 3,500 Retained earnings 12,860 Total assets $29,160 Total liabilities and equity $29,160 Income Statement for December 31, 2019 (Thousands of Dollars) Sales $36,000 Operating costs 34,000 Earnings before interest and taxes $ 2,000 Interest 160 Pre-tax earnings $ 1,840 Taxes (25%) 460 Net income $ 1,380 Dividends (40%) $ 552 Addition to retained earnings $ 828 Stevens grew rapidly in 2019 and financed the growth with notes payable and long-term bonds. Stevens expects sales to…

Answer 1

Question

Chapter 8, Problem 1UJ

To determine

Introduction: Inventory includes raw materials, work-in-process goods and finished products which are held with the purpose of sale.

Case 1: T J International

Given: TJ International is a manufacturer of specialty building products. T J International’s adapted income statement and information concerning inventories from its annual report is provided in the question statement.

(a)

To determine how much would income before taxes have been if FIFO costing had been used to value all inventories.

To determine

(b)

To explain: To explain the income tax rate is 46.6%, what would income tax have been if FIFO costing had been used to value all inventories. In your opinion, is this difference in net income between the two methods material. Explain.

To determine

(c)

To explain: To explain the use of a different costing system for different types of inventory mean that there is a different physical flow of goods among the different types of inventory.

To determine

Case 2: N Pharmaceuticals, Inc.

Given: Description of N Pharmaceuticals has been provided in the question.

(a)

To explain: To explain what would you expect from the physical flow of goods for a pharmaceutical manufacturer to be like.

To determine

(b)

To state: To state the factors to be considered while selecting the inventory system.

To determine

(c)

To determine the reason for not including the amount of inventory used in stock of inventory.

To determine

Case 3: The K Company

Given: Data for K Company reported in its annual report, has been provided in the question.

(a)

To compute: To compute K’s inventory turnovers using:

(1) Cost of sales and LIFO inventory.

(2) Cost of sales and FIFO inventory.

To determine

(b)

To compute: To calculate turnover, using:

(1) Sales and LIFO inventory.

(2) Sales and FIFO inventory.

To determine

(c)

To state: To state which method you would choose to evaluate K’s performance. Justify your choice.

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Financing Deficit Stevens Textile Corporation's 2019 financial statements are shown below: Just need the correct LOC? Balance Sheet as of December 31, 2019 (Thousands of Dollars) Cash $ 1,080 Accounts payable $ 4,320 Receivables 6,480 Accruals 2,880 Inventories 9,000 Line of credit 0 Total current assets $16,560 Notes payable 2,100 Net fixed assets 12,600 Total current liabilities $ 9,300 Mortgage bonds 3,500 Common stock 3,500 Retained earnings 12,860 Total assets $29,160 Total liabilities and equity $29,160 Income Statement for December 31, 2019 (Thousands of Dollars) Sales $36,000 Operating costs 34,000 Earnings before interest and taxes $ 2,000 Interest 160 Pre-tax earnings $ 1,840 Taxes (25%) 460 Net income $ 1,380 Dividends (40%) $ 552 Addition to retained earnings $ 828 Stevens grew rapidly in 2019 and financed the growth with notes payable and long-term bonds. Stevens expects sales to…

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Answer 2

Question

Chapter 8, Problem 1UJ

To determine

Introduction: Inventory includes raw materials, work-in-process goods and finished products which are held with the purpose of sale.

Case 1: T J International

Given: TJ International is a manufacturer of specialty building products. T J International’s adapted income statement and information concerning inventories from its annual report is provided in the question statement.

(a)

To determine how much would income before taxes have been if FIFO costing had been used to value all inventories.

To determine

(b)

To explain: To explain the income tax rate is 46.6%, what would income tax have been if FIFO costing had been used to value all inventories. In your opinion, is this difference in net income between the two methods material. Explain.

To determine

(c)

To explain: To explain the use of a different costing system for different types of inventory mean that there is a different physical flow of goods among the different types of inventory.

To determine

Case 2: N Pharmaceuticals, Inc.

Given: Description of N Pharmaceuticals has been provided in the question.

(a)

To explain: To explain what would you expect from the physical flow of goods for a pharmaceutical manufacturer to be like.

To determine

(b)

To state: To state the factors to be considered while selecting the inventory system.

To determine

(c)

To determine the reason for not including the amount of inventory used in stock of inventory.

To determine

Case 3: The K Company

Given: Data for K Company reported in its annual report, has been provided in the question.

(a)

To compute: To compute K’s inventory turnovers using:

(1) Cost of sales and LIFO inventory.

(2) Cost of sales and FIFO inventory.

To determine

(b)

To compute: To calculate turnover, using:

(1) Sales and LIFO inventory.

(2) Sales and FIFO inventory.

To determine

(c)

To state: To state which method you would choose to evaluate K’s performance. Justify your choice.

Expert Solution & Answer

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Answer 3

Question

Chapter 8, Problem 1UJ

To determine

Introduction: Inventory includes raw materials, work-in-process goods and finished products which are held with the purpose of sale.

Case 1: T J International

Given: TJ International is a manufacturer of specialty building products. T J International’s adapted income statement and information concerning inventories from its annual report is provided in the question statement.

(a)

To determine how much would income before taxes have been if FIFO costing had been used to value all inventories.

To determine

(b)

To explain: To explain the income tax rate is 46.6%, what would income tax have been if FIFO costing had been used to value all inventories. In your opinion, is this difference in net income between the two methods material. Explain.

To determine

(c)

To explain: To explain the use of a different costing system for different types of inventory mean that there is a different physical flow of goods among the different types of inventory.

To determine

Case 2: N Pharmaceuticals, Inc.

Given: Description of N Pharmaceuticals has been provided in the question.

(a)

To explain: To explain what would you expect from the physical flow of goods for a pharmaceutical manufacturer to be like.

To determine

(b)

To state: To state the factors to be considered while selecting the inventory system.

To determine

(c)

To determine the reason for not including the amount of inventory used in stock of inventory.

To determine

Case 3: The K Company

Given: Data for K Company reported in its annual report, has been provided in the question.

(a)

To compute: To compute K’s inventory turnovers using:

(1) Cost of sales and LIFO inventory.

(2) Cost of sales and FIFO inventory.

To determine

(b)

To compute: To calculate turnover, using:

(1) Sales and LIFO inventory.

(2) Sales and FIFO inventory.

To determine

(c)

To state: To state which method you would choose to evaluate K’s performance. Justify your choice.

Expert Solution & Answer

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Answer 4

Question

Chapter 8, Problem 1UJ

To determine

Introduction: Inventory includes raw materials, work-in-process goods and finished products which are held with the purpose of sale.

Case 1: T J International

Given: TJ International is a manufacturer of specialty building products. T J International’s adapted income statement and information concerning inventories from its annual report is provided in the question statement.

(a)

To determine how much would income before taxes have been if FIFO costing had been used to value all inventories.

To determine

(b)

To explain: To explain the income tax rate is 46.6%, what would income tax have been if FIFO costing had been used to value all inventories. In your opinion, is this difference in net income between the two methods material. Explain.

To determine

(c)

To explain: To explain the use of a different costing system for different types of inventory mean that there is a different physical flow of goods among the different types of inventory.

To determine

Case 2: N Pharmaceuticals, Inc.

Given: Description of N Pharmaceuticals has been provided in the question.

(a)

To explain: To explain what would you expect from the physical flow of goods for a pharmaceutical manufacturer to be like.

To determine

(b)

To state: To state the factors to be considered while selecting the inventory system.

To determine

(c)

To determine the reason for not including the amount of inventory used in stock of inventory.

To determine

Case 3: The K Company

Given: Data for K Company reported in its annual report, has been provided in the question.

(a)

To compute: To compute K’s inventory turnovers using:

(1) Cost of sales and LIFO inventory.

(2) Cost of sales and FIFO inventory.

To determine

(b)

To compute: To calculate turnover, using:

(1) Sales and LIFO inventory.

(2) Sales and FIFO inventory.

To determine

(c)

To state: To state which method you would choose to evaluate K’s performance. Justify your choice.

Expert Solution & Answer

Learn your wayIncludes step-by-step video

See solution

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Answer 5

Chapter 8, Problem 1UJ

To determine

Introduction: Inventory includes raw materials, work-in-process goods and finished products which are held with the purpose of sale.

Case 1: T J International

Given: TJ International is a manufacturer of specialty building products. T J International’s adapted income statement and information concerning inventories from its annual report is provided in the question statement.

(a)

To determine how much would income before taxes have been if FIFO costing had been used to value all inventories.

To determine

(b)

To explain: To explain the income tax rate is 46.6%, what would income tax have been if FIFO costing had been used to value all inventories. In your opinion, is this difference in net income between the two methods material. Explain.

To determine

(c)

To explain: To explain the use of a different costing system for different types of inventory mean that there is a different physical flow of goods among the different types of inventory.

To determine

Case 2: N Pharmaceuticals, Inc.

Given: Description of N Pharmaceuticals has been provided in the question.

(a)

To explain: To explain what would you expect from the physical flow of goods for a pharmaceutical manufacturer to be like.

To determine

(b)

To state: To state the factors to be considered while selecting the inventory system.

To determine

(c)

To determine the reason for not including the amount of inventory used in stock of inventory.

To determine

Case 3: The K Company

Given: Data for K Company reported in its annual report, has been provided in the question.

(a)

To compute: To compute K’s inventory turnovers using:

(1) Cost of sales and LIFO inventory.

(2) Cost of sales and FIFO inventory.

To determine

(b)

To compute: To calculate turnover, using:

(1) Sales and LIFO inventory.

(2) Sales and FIFO inventory.

To determine

(c)

To state: To state which method you would choose to evaluate K’s performance. Justify your choice.

Answer 6

Chapter 8, Problem 1UJ

To determine

Introduction: Inventory includes raw materials, work-in-process goods and finished products which are held with the purpose of sale.

Case 1: T J International

Given: TJ International is a manufacturer of specialty building products. T J International’s adapted income statement and information concerning inventories from its annual report is provided in the question statement.

(a)

To determine how much would income before taxes have been if FIFO costing had been used to value all inventories.

Answer 7

Chapter 8, Problem 1UJ

To determine

Introduction: Inventory includes raw materials, work-in-process goods and finished products which are held with the purpose of sale.

Case 1: T J International

Given: TJ International is a manufacturer of specialty building products. T J International’s adapted income statement and information concerning inventories from its annual report is provided in the question statement.

(a)

To determine how much would income before taxes have been if FIFO costing had been used to value all inventories.

Answer 8

To determine

(b)

To explain: To explain the income tax rate is 46.6%, what would income tax have been if FIFO costing had been used to value all inventories. In your opinion, is this difference in net income between the two methods material. Explain.

Answer 9

To determine

(b)

To explain: To explain the income tax rate is 46.6%, what would income tax have been if FIFO costing had been used to value all inventories. In your opinion, is this difference in net income between the two methods material. Explain.

Answer 10

To determine

(c)

To explain: To explain the use of a different costing system for different types of inventory mean that there is a different physical flow of goods among the different types of inventory.

Answer 11

To determine

(c)

To explain: To explain the use of a different costing system for different types of inventory mean that there is a different physical flow of goods among the different types of inventory.

Answer 12

To determine

Case 2: N Pharmaceuticals, Inc.

Given: Description of N Pharmaceuticals has been provided in the question.

(a)

To explain: To explain what would you expect from the physical flow of goods for a pharmaceutical manufacturer to be like.

Answer 13

To determine

Case 2: N Pharmaceuticals, Inc.

Given: Description of N Pharmaceuticals has been provided in the question.

(a)

To explain: To explain what would you expect from the physical flow of goods for a pharmaceutical manufacturer to be like.

Answer 14

To determine

(b)

To state: To state the factors to be considered while selecting the inventory system.

Answer 15

To determine

(b)

To state: To state the factors to be considered while selecting the inventory system.

Answer 16

To determine

(c)

To determine the reason for not including the amount of inventory used in stock of inventory.

Answer 17

To determine

(c)

To determine the reason for not including the amount of inventory used in stock of inventory.

Answer 18

To determine

Case 3: The K Company

Given: Data for K Company reported in its annual report, has been provided in the question.

(a)

To compute: To compute K’s inventory turnovers using:

(1) Cost of sales and LIFO inventory.

(2) Cost of sales and FIFO inventory.

Answer 19

To determine

Case 3: The K Company

Given: Data for K Company reported in its annual report, has been provided in the question.

(a)

To compute: To compute K’s inventory turnovers using:

(1) Cost of sales and LIFO inventory.

(2) Cost of sales and FIFO inventory.

Answer 20

To determine

(b)

To compute: To calculate turnover, using:

(1) Sales and LIFO inventory.

(2) Sales and FIFO inventory.

Answer 21

To determine

(b)

To compute: To calculate turnover, using:

(1) Sales and LIFO inventory.

(2) Sales and FIFO inventory.

Answer 22

To determine

(c)

To state: To state which method you would choose to evaluate K’s performance. Justify your choice.

Answer 23

To determine

(c)

To state: To state which method you would choose to evaluate K’s performance. Justify your choice.

Answer 24

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Ch. 8 - Prob. 1Q Ch. 8 - 2. Why should inventories be included in (a) a...Ch. 8 - 3. What is the difference between a perpetual...Ch. 8 - Prob. 4Q Ch. 8 - Prob. 5Q Ch. 8 - Prob. 6Q Ch. 8 - Prob. 7Q Ch. 8 - Prob. 8Q Ch. 8 - Prob. 9Q Ch. 8 - Prob. 10Q

(b) To explain: To explain the income tax rate is 46.6%, what would income tax have been if FIFO costing had been used to value all inventories. In your opinion, is this difference in net income between the two methods material. Explain.

(c) To explain: To explain the use of a different costing system for different types of inventory mean that there is a different physical flow of goods among the different types of inventory.

Case 2: N Pharmaceuticals, Inc. Given: Description of N Pharmaceuticals has been provided in the question. (a) To explain: To explain what would you expect from the physical flow of goods for a pharmaceutical manufacturer to be like.

(b) To state: To state the factors to be considered while selecting the inventory system.

(c) To determine the reason for not including the amount of inventory used in stock of inventory.

Case 3: The K Company Given: Data for K Company reported in its annual report, has been provided in the question. (a) To compute: To compute K’s inventory turnovers using: (1) Cost of sales and LIFO inventory. (2) Cost of sales and FIFO inventory.

(b) To compute: To calculate turnover, using: (1) Sales and LIFO inventory. (2) Sales and FIFO inventory.

(c) To state: To state which method you would choose to evaluate K’s performance. Justify your choice.

Chapter 8 Solutions

(b)

To explain: To explain the income tax rate is 46.6%, what would income tax have been if FIFO costing had been used to value all inventories. In your opinion, is this difference in net income between the two methods material. Explain.

(c)

To explain: To explain the use of a different costing system for different types of inventory mean that there is a different physical flow of goods among the different types of inventory.

Case 2: N Pharmaceuticals, Inc.

Given: Description of N Pharmaceuticals has been provided in the question.

(a)

To explain: To explain what would you expect from the physical flow of goods for a pharmaceutical manufacturer to be like.

(b)

To state: To state the factors to be considered while selecting the inventory system.

(c)

To determine the reason for not including the amount of inventory used in stock of inventory.

Case 3: The K Company

Given: Data for K Company reported in its annual report, has been provided in the question.

(a)

To compute: To compute K’s inventory turnovers using:

(1) Cost of sales and LIFO inventory.

(2) Cost of sales and FIFO inventory.

(b)

To compute: To calculate turnover, using:

(1) Sales and LIFO inventory.

(2) Sales and FIFO inventory.

(c)

To state: To state which method you would choose to evaluate K’s performance. Justify your choice.