10th Edition

ISBN: 9781260310177

Author: Mark W. Nelson, Wayne B. Thomas J. David Spiceland

Publisher: McGraw-Hill Education

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Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in…

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Textbook Question

Chapter 9, Problem 9.10BE

Conventional retail method

• LO9–4

Roberson Corporation uses a periodic inventory system and the retail inventory method. Accounting records provided the following information for the 2018 fiscal year:

	Cost	Retail
Beginning inventory	$220,000	$400,000
Net purchases	640,000	1,180,000
Freight-in	17,800
Net mark-ups		16,000
Net markdowns		6,000
Normal spoilage		3,000
Net sales		1,300,000

The company records sales to employees net of discounts. These discounts totaled $15,000 for the year. Estimate ending inventory and cost of goods sold using the conventional method.

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Chapter 9, Problem 9.9BE

Chapter 9, Problem 9.11BE

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The comparative balance sheets and an income statement for Raceway Corporation follow. Balance Sheets As of December 31 Year 2 Year 1 Assets Cash $ 6,300 $ 48,400 Accounts receivable 10,200 7,260 Inventory 45,200 56,000 Prepaid rent 700 2,140 Equipment 140,000 144,000 Accumulated depreciation (73,400) (118,000) Land 116,000 50,000 Total assets $ 245,000 $ 189,800 Liabilities Accounts payable (inventory) $ 37,200 $ 40,000 Salaries payable 12,200 10,600 Stockholders’ equity Common stock, $50 par value 150,000 120,000 Retained earnings 45,600 19,200 Total liabilities and stockholders’ equity $ 245,000 $ 189,800 Income Statement For the Year Ended December 31, Year 2 Sales $ 480,000 Cost of goods sold (264,000) Gross profit 216,000 Operating expenses Depreciation expense (11,400) Rent expense (7,000) Salaries expense (95,200) Other operating expenses (76,000) Net income $ 26,400 Other Information Purchased…

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Chapter 9 Solutions

Intermediate Accounting, 10 Ed

Ch. 9 - Explain the (a) lower of cost or net realizable...Ch. 9 - What are the various levels of aggregation to...Ch. 9 - Describe the alternative approaches for recording...Ch. 9 - Explain the gross profit method of estimating...Ch. 9 - The Rider Company uses the gross profit method to...Ch. 9 - Explain the retail inventory method of estimating...Ch. 9 - Both the gross profit method and the retail...Ch. 9 - Define each of the following retail terms: initial...Ch. 9 - Explain how to estimate the average cost of...Ch. 9 - Prob. 9.10Q

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Solution Summary: The author explains the conventional retail method, which eliminates markdowns from the calculation of the cost-to-retail percentage.

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