Intermediate Accounting
9th Edition
ISBN: 9781259722660
Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher: McGraw-Hill Education
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Chapter 9, Problem 9.24E
1.
To determine
Method of Inventory: Inventory refers to the current assets that a company expects to sell during the normal course of business operations, the goods that are under process to be completed for future sale, or currently used for producing goods to be sold in the market. Inventory is valued under three methods:
FIFO: Under this inventory method, the units that are purchased first, are sold first. Thus, it starts from the selling of the beginning inventory, followed by the units purchased in a chronological order of their purchases took place during a particular period.
LIFO: Under this inventory method, the units that are purchased last, are sold first. Thus, it starts from the selling of the units recently purchased and ending with the beginning inventory.
Average cost method: Under this method, the cost of the goods available for sale is divided by the number of units available for sale during a particular period.
To prepare: the 2018
2.
To determine
the amount of cost of goods sold that would be higher or lower in the 2017 revised income statement.
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Students have asked these similar questions
Review Exercises
7-41
M7-8
Assuming no beginning inventory, what can be said
about the trend of inventory prices if cost of goods
sold computed when inventory is valucd using the
FIFO method exceeds cost of goods sold when
inventory is valued using the LIFO method?
Under the dollar-value LIFO inventory method,
Kern's inventory method, Kern's inventory on
December 31, 2016, would be:
LO 7.5
a. $650,000
b. $655,000
c. $660,000
d. $720,000
a. Prices decreased.
When the double-extension approach to the
dollar-value LIFO inventory cost flow method is
used, the inventory layer added in the current year
is multiplied by an index number. How would the
following be used in the calculation of this index
number?
M7-10
b. Prices remained unchanged.
c. Prices increased.
d. Price trend cannot be determined from
information given.
LO 7.7
On December 31, 2015, Kern Company adopted
the dollar-value LIFO inventory method. All of
Kern's inventories constitute a single pool. The
inventory on Dccember 31,…
Chapter 8 Perform (ASAC LO 5 and BSAC LO 2)
Kingbird Company began operations late in 2024 and adopted the conventional retail inventory method.
Because there was no beginning inventory for 2024 and no markdowns during 2024, the ending inventory
for 2024 was $13,708 under both the conventional retail method and the LIFO retail method. At the end of
2025, management wants to compare the results of applying the conventional and LIFO retail methods.
There was no change in the price level during 2025. The following data are available for computations.
Cost
Inventory, January 1, 2025
Sales revenue
Net markups mu
Net markdowns mo
Purchases
Freight-in
Estimated theft
(b) The LIFO retail method.
Ending inventory at cost
Ending inventory at retail
Cost
$
$13,708
$
63,900
5,888
Retail
Compute the cost of the 2025 ending inventory under both:
(a) The conventional retail method.
$20,200
77,000 mu
9,900 mD
1,800 ex Beg
Ending inventory using the conventional retail method $
87,500
2,200
27336
40800…
PROBLEM 2: (CHANGE IN ACCOUNTING POLICY)
Shilo Co. has been using the weighted average method of inventory costing since it began
operations in 2018. Shilo Co. has reported the following net income:
Net income Under Weighted Average Method
P 400,000
2018
2019
285,000
320,000
2020
Beginning 2021 the company decided to change the inventory cost formula to FIFO method. The
following are the December 31 inventory balances under each method:
2018
2019
2020
MI, end Per Books
(Weighted Average)
P 180,000
250,000
330,000
MI, End
(FIFO)
P 200,000
310,000
440,000
MI, End Per Books
Understated By
P 20,000
60,000
110,000
Compute for the following:
a. Restated net income for 2019 and 2020 as a result of the change in policy
b. Adjustment to the accumulated profits beginning balance of 2021 as a result of the
change
Chapter 9 Solutions
Intermediate Accounting
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
Ch. 9 - Explain the LIFO retail inventory method.Ch. 9 - Discuss the treatment of freight-in, net markups,...Ch. 9 - Explain the difference between the retail...Ch. 9 - Prob. 9.14QCh. 9 - Prob. 9.15QCh. 9 - Explain the accounting treatment of material...Ch. 9 - It is discovered in 2018 that ending inventory in...Ch. 9 - Identify any differences between U.S. GAAP and...Ch. 9 - (Based on Appendix 9) Define purchase commitments....Ch. 9 - (Based on Appendix 9) Explain how purchase...Ch. 9 - Lower of cost or net realizable value LO91 Ross...Ch. 9 - Lower of cost or net realizable value LO91 SLR...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Prob. 9.5BECh. 9 - Gross profit method; solving for unknown LO92...Ch. 9 - Retail inventory method; average cost LO93 Kiddie...Ch. 9 - Retail inventory method; LIFO LO93 Refer to the...Ch. 9 - Conventional retail method LO94 Refer to the...Ch. 9 - Conventional retail method LO94 Roberson...Ch. 9 - Dollar-value LIFO retail LO95 On January 1, 2018,...Ch. 9 - Dollar-value LIFO retail LO95 This exercise is a...Ch. 9 - Change i n inventory costing methods LO96 In...Ch. 9 - Change in inventory costing methods LO96 In 2018,...Ch. 9 - Inventory error LO97 In 2018, Winslow...Ch. 9 - Inventory error LO97 Refer to the situation...Ch. 9 - Lower of cost or net realizable value LO91 Herman...Ch. 9 - Lower of cost or net realizable value LO91 The...Ch. 9 - Lower of cost or net realizable value LO91 Tatum...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Prob. 9.8ECh. 9 - Prob. 9.9ECh. 9 - Prob. 9.10ECh. 9 - Gross profit method LO92 Royal Gorge Company uses...Ch. 9 - Prob. 9.12ECh. 9 - Retail inventory method; average cost LO93 San...Ch. 9 - Prob. 9.14ECh. 9 - Retail inventory method; LIFO LO93 Crosby Company...Ch. 9 - Prob. 9.16ECh. 9 - Conventional retail method; employee discounts ...Ch. 9 - Retail inventory method; solving for unknowns ...Ch. 9 - Dollar-value LIFO retail LO95 On January 1, 2018,...Ch. 9 - Prob. 9.20ECh. 9 - Dollar-value LIFO retail LO95 Lance-Hefner...Ch. 9 - Prob. 9.22ECh. 9 - Change in inventory costing methods LO96 In 2018,...Ch. 9 - Prob. 9.24ECh. 9 - Error correction; inventory error LO97 During...Ch. 9 - Prob. 9.26ECh. 9 - Inventory error LO97 In 2018, the internal...Ch. 9 - Inventory errors LO97 In 2018, the controller of...Ch. 9 - Concepts; terminology LO91 through LO97 Listed...Ch. 9 - Prob. 9.30ECh. 9 - Prob. 9.31ECh. 9 - Lower of cost or net realizable value LO91 Decker...Ch. 9 - Prob. 9.2PCh. 9 - Lower of cost or market LO91 Forester Company has...Ch. 9 - Prob. 9.4PCh. 9 - Prob. 9.5PCh. 9 - Prob. 9.6PCh. 9 - Retail inventory method; conventional and LIFO ...Ch. 9 - Prob. 9.8PCh. 9 - Prob. 9.9PCh. 9 - Dollar-value LIFO retail method LO95 [This is a...Ch. 9 - Dollar-value LIFO retail LO95 On January 1, 2018,...Ch. 9 - Retail inventory method; various applications ...Ch. 9 - Retail inventory method; various applications ...Ch. 9 - Prob. 9.14PCh. 9 - Inventory errors LO97 You have been hired as the...Ch. 9 - Inventory errors LO97 The December 31, 2018,...Ch. 9 - Integrating problem; Chapters 8 and 9; inventory...Ch. 9 - Purchase commitments Appendix In November 2018,...Ch. 9 - Judgment Case 91 Inventoriable costs; lower of...Ch. 9 - Integrating Case 93 FIFO and lower of cost or net...Ch. 9 - Prob. 9.4BYPCh. 9 - Prob. 9.5BYPCh. 9 - Prob. 9.6BYPCh. 9 - Prob. 9.7BYPCh. 9 - Real World Case 98 Various inventory issues;...Ch. 9 - Prob. 9.9BYPCh. 9 - Judgment Case 910 Inventory errors LO97 Some...Ch. 9 - Ethics Case 911 Overstatement of ending inventory ...Ch. 9 - Analysis Case 912 Purchase commitments Appendix...Ch. 9 - Continuing Cases Target Case LO93, LO94, LO95...Ch. 9 - Prob. 1CCIFRS
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