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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.)

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.)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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: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
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)
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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