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.
(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.
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Chapter 8 Solutions
INTERMEDIATE ACCOUNTING(LL)+ACCESS
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- Need answerarrow_forwardPresented below is information related to equipment owned by Concord Company at December 31, 2020. Cost $9,450,000 Accumulated depreciation to date 1,050,000 Expected future net cash flows 7,350,000 Fair value 5,040,000 Assume concord intends to dispose of the equipment in the coming year. it is expected that the cost of the disposal will be $21,000. As of December 31, 2020, the equipment has a remaining useful life of 4 years. (b) prepare the journal entry (if any) to record depreciation expense for 2026. (c) the asset was not sold by december 31, 2026. The fair value of the equipment on that date is $5,565,000. prepare the journal entry (if any) necesarry to record this increase in fair value. it is expected that the cost of disposal is still $21,000.arrow_forwardDirect labor hours are should be?arrow_forward
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