FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
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Jaffa Company prepared its annual financial statements dated December 31 of the current year. The company applies the
FIFO inventory costing method; however, the company neglected to apply lower of cost or net realizable value to the
ending inventory. The preliminary current year income statement follows:
Sales revenue
Cost of goods sold
Beginning inventory
Purchases
Goods available for sale
Ending inventory (FIFO cost)
Cost of goods sold
Gross profit
Operating expenses
Pretax income
Income tax expense (35%)
Net income
Item
A
B
с
D
Assume that you have been asked to restate the current year financial statements to incorporate lower of cost or NRV. You
have developed the following data relating to the current year ending inventory:
Sales revenue
Quantity
3,210
1,660
7,260
3,360
Cost of goods sold:
Beginning inventory
Purchases
Unit
$ 34,600
200,000
234,600
66,794
$4.60
4.10
4.10
4.60
Goods available for sale
JAFFA COMPANY
Income Statement (Corrected)
For the Year Ended December 31, Current Year
$296,000
Acquisition
Cost
167,806
128,194
63,600
64,594
22,608
$ 41,986
Required:
1. Prepare the income statement to reflect lower of cost or net realizable value valuation of the current year ending inventory. Apply
lower of cost or NRV on an item-by-item basis. (Round your answers to nearest dollar amount.)
0
Total
$ 14,766
6,806
29,766
15,456
$ 66,794
Net Realizable.
Value Per Unit
$ 3.60
5.60
2.10
6.60](https://content.bartleby.com/qna-images/question/6c7362b4-811e-48b1-a295-094a04c8c298/d0bb852d-dedb-47ef-a683-01c05a5ce7d0/fcjff76_processed.jpeg)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
Jaffa Company prepared its annual financial statements dated December 31 of the current year. The company applies the
FIFO inventory costing method; however, the company neglected to apply lower of cost or net realizable value to the
ending inventory. The preliminary current year income statement follows:
Sales revenue
Cost of goods sold
Beginning inventory
Purchases
Goods available for sale
Ending inventory (FIFO cost)
Cost of goods sold
Gross profit
Operating expenses
Pretax income
Income tax expense (35%)
Net income
Item
A
B
с
D
Assume that you have been asked to restate the current year financial statements to incorporate lower of cost or NRV. You
have developed the following data relating to the current year ending inventory:
Sales revenue
Quantity
3,210
1,660
7,260
3,360
Cost of goods sold:
Beginning inventory
Purchases
Unit
$ 34,600
200,000
234,600
66,794
$4.60
4.10
4.10
4.60
Goods available for sale
JAFFA COMPANY
Income Statement (Corrected)
For the Year Ended December 31, Current Year
$296,000
Acquisition
Cost
167,806
128,194
63,600
64,594
22,608
$ 41,986
Required:
1. Prepare the income statement to reflect lower of cost or net realizable value valuation of the current year ending inventory. Apply
lower of cost or NRV on an item-by-item basis. (Round your answers to nearest dollar amount.)
0
Total
$ 14,766
6,806
29,766
15,456
$ 66,794
Net Realizable.
Value Per Unit
$ 3.60
5.60
2.10
6.60
Transcribed Image Text:2. Compare the lower of cost or net realizable value effect on each amount that was changed on the income statement in
requirement (1). (Decreases should be indicated by a minus sign.)(Round your answers to nearest dollar amount.)
Item Changed
Ending inventory
Cost of goods sold
Gross profit
Pretax income
Income tax expense
Net income
FIFO Cost
Basis
Lower of Cost
or NRV
Amount of
Change
(Decrease)
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