Cengagenowv2, 1 Term Printed Access Card For Wahlen/jones/pagach’s Intermediate Accounting: Reporting And Analysis, 2017 Update, 2nd
2nd Edition
ISBN: 9781337912259
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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Chapter 8, Problem 2MC
To determine
Calculate the unit cost of Product A at December 31, 2016.
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Lower of Cost or Market
Moore Company uses the LIFO cost flow assumption and carries Product A in inventory on December 31, 2019, at its unit cost of $9.50. Because of a sharp decline in demand for the product, the selling price was reduced to $10.00 per unit. Moore's normal profit margin on Product A is $2.00, disposal costs are $1.00 per unit, and the replacement cost is $6.50.
Under the lower of cost or market rule, Moore's December 31, 2019, inventory of Product A should be valued at a unit cost of:
a.$9.50
b.$6.50
c.$7.00
d.$9.00
The Cecil-Booker Vending Company changed its method of valuing inventory from the average cost method to the FIFO cost method at the beginning of 2016. At December 31, 2015, inventories were $120,000 (average cost basis) and were $124,000 a year earlier. Cecil-Booker’s accountants determined that the inventories would have totaled $155,000 at December 31, 2015, and $160,000 at December 31, 2014, if determined on a FIFO basis. A tax rate of 40% is in effect for all years. One hundred thousand common shares were outstanding each year. Income from continuing operations was $400,000 in 2015 and $525,000 in 2016. There were no discontinued operations either year. Required: 1. Prepare the journal entry to record the change in accounting principle. (All tax effects should be reflected in the deferred tax liability account.) 2. Prepare the 2016–2015 comparative income statements beginning with income from continuing operations. Include per share amounts.
In March 2015, XYZ Corp. purchased an item of inventory for $30. By June,
that item could be purchased for $26 and re-sold for $31. XYZ's normal profit
for the item is $4. At what amount should XYZ report the item in its June 30
balance sheet? XYZ uses the LIFO inventory cost flow assumption. (omit , and
$ in the answer)
30
Chapter 8 Solutions
Cengagenowv2, 1 Term Printed Access Card For Wahlen/jones/pagach’s Intermediate Accounting: Reporting And Analysis, 2017 Update, 2nd
Ch. 8 - Prob. 1GICh. 8 - Define the upper and lower constraints used in the...Ch. 8 - How may a company apply the lower of cost or a...Ch. 8 - What is the major criticism of the lower of cost...Ch. 8 - Prob. 5GICh. 8 - Prob. 6GICh. 8 - Prob. 7GICh. 8 - Prob. 8GICh. 8 - What is the basic assumption underlying the gross...Ch. 8 - Prob. 10GI
Ch. 8 - Explain the meaning of the following terms:...Ch. 8 - Prob. 12GICh. 8 - Prob. 13GICh. 8 - The retail inventory method indicated an inventory...Ch. 8 - Prob. 15GICh. 8 - Indicate the effect of each of the following...Ch. 8 - Sienna Company uses the FIFO cost flow assumption....Ch. 8 - Prob. 2MCCh. 8 - Prob. 3MCCh. 8 - Prob. 4MCCh. 8 - Prob. 5MCCh. 8 - Under the retail inventory method, freight-in...Ch. 8 - The retail inventory method would include which of...Ch. 8 - Prob. 8MCCh. 8 - Estimates of price-level changes for specific...Ch. 8 - A company forgets to record a purchase on credit...Ch. 8 - The following information is available regarding...Ch. 8 - Each unit of Black Corporations inventory has a...Ch. 8 - Prob. 3RECh. 8 - Prob. 4RECh. 8 - Prob. 5RECh. 8 - Kays Beauty Supply uses the gross profit method to...Ch. 8 - Uncle Butchs Hunting Supply Shop reports the...Ch. 8 - Use the information in RE8-7. Calculate Uncle...Ch. 8 - Use the information in RE8-7. Calculate Uncle...Ch. 8 - Use the information in RE8-7. Calculate Uncle...Ch. 8 - Johnson Corporation had beginning inventory of...Ch. 8 - Prob. 12RECh. 8 - Prob. 13RECh. 8 - Prob. 14RECh. 8 - Lower of Cost or Market Stiles Corporation uses...Ch. 8 - Prob. 2ECh. 8 - Prob. 3ECh. 8 - Prob. 4ECh. 8 - Prob. 5ECh. 8 - Prob. 6ECh. 8 - Prob. 7ECh. 8 - Gross Profit Method: Estimation of Theft Loss You...Ch. 8 - Retail Inventory Method Harmes Company is a...Ch. 8 - Prob. 10ECh. 8 - Retail Inventory Method The following information...Ch. 8 - Prob. 12ECh. 8 - Prob. 13ECh. 8 - Prob. 14ECh. 8 - Errors A company that uses the periodic inventory...Ch. 8 - Prob. 16ECh. 8 - Prob. 17ECh. 8 - Lower of Cost or Market Palmquist Company has five...Ch. 8 - Prob. 2PCh. 8 - Prob. 3PCh. 8 - Prob. 4PCh. 8 - Prob. 5PCh. 8 - Prob. 6PCh. 8 - Prob. 7PCh. 8 - Prob. 8PCh. 8 - Retail Inventory Method Weber Corporation uses the...Ch. 8 - Prob. 10PCh. 8 - Prob. 11PCh. 8 - Prob. 12PCh. 8 - Errors As controller of Lerner Company, which uses...Ch. 8 - Prob. 14PCh. 8 - (Appendix 8.1) Lower of Cost or Market The...Ch. 8 - Prob. 16PCh. 8 - Prob. 1CCh. 8 - Sandberg Paint Company, your client, manufactures...Ch. 8 - Prob. 3CCh. 8 - Prob. 4CCh. 8 - Prob. 5CCh. 8 - Prob. 6CCh. 8 - Prob. 7CCh. 8 - Various Inventory Issues Hudson Company, which is...Ch. 8 - Prob. 10CCh. 8 - Prob. 11C
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- Aquatic Equipment Corporation decided to switch from the LIFO method of costing inventories to the FIFOmethod at the beginning of 2018. The inventory as reported at the end of 2017 using LIFO would have been$60,000 higher using FIFO. Retained earnings at the end of 2017 was reported as $780,000 (reflecting the LIFOmethod). The tax rate is 40%.Required:1. Calculate the balance in retained earnings at the time of the change (beginning of 2018) as it would have beenreported if FIFO had been used in prior years.2. Prepare the journal entry at the beginning of 2018 to record the change in accounting principlearrow_forwardA company’s normal selling price for its product is $21 per unit. However, due to market competition, the selling price has fallen to $16 per unit. This company's current FIFO inventory consists of 190 units purchased at $17 per unit. Net realizable value has fallen to $14 per unit. Calculate the value of this company's inventory at the lower of cost or market.arrow_forwardA company normally sells its product for $20 per unit. This company's current inventory consists of 200 units purchased at $16 per unit. Replacement cost has now fallen to $13 per unit. Calculate the value of this company's inventory at a lower cost or market. A) $2,550 B) $2,600 C) $3,000 D) $3,200arrow_forward
- The Cecil-Booker Vending Company changed its method of valuing inventory from the average cost method tothe FIFO cost method at the beginning of 2018. At December 31, 2017, inventories were $120,000 (average costbasis) and were $124,000 a year earlier. Cecil-Booker’s accountants determined that the inventories would havetotaled $155,000 at December 31, 2017, and $160,000 at December 31, 2016, if determined on a FIFO basis. Atax rate of 40% is in effect for all years.One hundred thousand common shares were outstanding each year. Income from continuing operations was$400,000 in 2017 and $525,000 in 2018. There were no discontinued operations either year.Required:1. Prepare the journal entry to record the change in accounting principle. (All tax effects should be reflected inthe deferred tax liability account.)2. Prepare the 2018–2017 comparative income statements beginning with income from continuing operations.Include per share amounts.arrow_forwardIn March 2018, Blue Devil Company realized that they had overstated their December 2016 ending inventory by $15,000. If the reported Net Income for 2017 was $125,000, what should be the correct Net Income for 2017? Why is the answer 140,000? If ending inventory is overstated by 15k wouldnt cost of goods sold be understated by 15k making Net income be overstated by 15k, therefore subtracting 15k from the net income to correct the error? why would one add 15k to Net income to get 140k?arrow_forwardAquatic Equipment Corporation decided to switch from the LIFO method of costing inventories to the FIFO method at the beginning of 2016. The inventory as reported at the end of 2015 using LIFO would have been $60,000 higher using FIFO. Retained earnings at the end of 2015 was reported as $780,000 (reflecting the LIFO method). The tax rate is 40%. Required: 1. Calculate the balance in retained earnings at the time of the change (beginning of 2016) as it would have been reported if FIFO had been used in prior years. 2. Prepare the journal entry at the beginning of 2016 to record the change in accounting principle.arrow_forward
- Flay Foods has always used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2016, Flay decided to change to the LIFO method. As a result of the change, net income in 2016 was $80 million. If the company had used LIFO in 2015, its cost of goods sold would have been higher by $6 million that year. Flay’s records of inventory purchases and sales are not available for 2014 and several previous years. Last year, Flay reported the following net income amounts in its comparative income statements: ($ in millions) 2015 2014 2013 Net income $84 $82 $80 Required: 1. Prepare the journal entry at the beginning of 2016 to record the change in accounting principle. (Ignore income taxes.) 2. Briefly describe other steps Flay will take to report the change. 3. What amounts will Flay report for net income in its 2016–2014 comparative income statements?arrow_forwardI need answer this questionarrow_forwardIn 2016, J J Dishes changed its method of valuing inventory from the FIFO method to the LIFO method. At December 31, 2015, J J’s inventories were $96 million (FIFO). J J’s records were insufficient to determine what inventories would have totaled if determined on a LIFO cost basis. Briefly describe the steps J J should take to report the change.arrow_forward
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