Intermediate Accounting
3rd Edition
ISBN: 9780136912644
Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella
Publisher: Pearson Education (US)
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Textbook Question
Chapter 10, Problem 10.11E
Lower of Cost or Market. All-Kinds-of-Cases Company sells cases for smart phones and notepad computers. The company uses the LIFO method for costing inventory. All-Kinds-of-Cases groups inventory by the device manufacturer for which the case is made in its LCM computations. All-Kinds-of-Cases provided the following information regarding inventory at the end of the current year
| Group No. | Manufacturer | CRC | No. of Units | SP | Disposal | NPM | Cost |
| Smart phone case | General Tech | $8 | 450 | $14 | $1 | $ 6 | $ 5 |
| Notepad case | General Tech | 14 | 300 | 35 | 2 | 18 | 16 |
| Smart phone case | Pacific Base | 5 | 750 | 8 | 2 | 4 | 7 |
| Notepad case | Pacific Base | 12 | 520 | 32 | 2 | 15 | 14 |
Definitions:
CRC = Current Replacement Cost
SP = Selling Price
DISPOSAL = Costs of Completion and Disposal
NPM = Normal Profit Margin
Required
- a. Conduct a lower-of-cost-or-market test for All-Kinds-of-Cases assuming that it uses the total inventory approach for LCM computations.
- b. Conduct a lower-of-cost-or-market test for Ail-Kinds-of-Cases assuming that it uses the individual-item approach for LCM computations.
- c. Conduct a lower-of-cost-or-market test for AII-Kinds-of-Cases assuming that it uses the group-by-group approach for LCM computations.
- d. Prepare the
journal entry needed to adjust All-Kinds of Cases s inventory to a lower-of-cost-or-market (LCM) basis assuming that LCM is applied to total inventory groups All-Kinds of Cases uses the indirect approach to record any adjustments to LCM
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Wildhorse Company is a multiproduct firm that uses the perpetual inventory system. The following information concerns one of its products, the Hawkeye.
Date
Transaction
Quantity
Price
Cost
Jan.
1
Beginning inventory
1,000
$12
Feb.
4
Purchase
2,000
18
Feb.
20
Sale
2,300
$30
Apr.
2
Purchase
3,200
23
May
4
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2,000
33
(a)
Your answer has been saved. See score details after the due date.
Compute cost of goods sold and ending inventory under the FIFO method. (Round answers to 0 decimal places, e.g. 1,245.)
FIFO
Cost of goods sold
77,900
Ending inventory
43,700
(b)
Compute cost of goods sold and ending inventory under the LIFO method. (Round answers to 0 decimal places, e.g. 1,245.)
LIFO
Cost of goods sold
$enter a dollar amount
Ending inventory
$enter a dollar amount
MusicPlace specializes in sound equipment. Company records indicate the following data for a line of speakers
(Click the icon to view the data)
Read the requirements
Requirement 1. Determine the amounts that MusicPlace should report for cost of goods sold and ending inventory two ways: a. FIFO and b. LIFO (MusicPlace uses a perpetual inventory system.)
Start by determining the amounts that MusicPlace should report for cost of goods sold and ending inventory under a FIFO
FIFO method cost of goods sold
FIFO method ending inventory
Determinie the amounts that MusicPlace should report for cost of goods sold and ending inventory under b. LIFO.
LIFO method cost of goods sold
LIFO method ending inventory
Requirement 2. MusicPlace uses the FIFO method. Prepare the company's income statement for the month ended March 31, 2021, reporting gross profit. Operating expenses totaled $280, and the
income tax rate was 40%. (Round answers to the nearest dollar)
MusicPlace
Income Statement
Month Ended…
Journal entries for recording revenue and costs for service provider.
For a traditional inventory-carrying companies, recording journal entries for revenue and costs is something like the following:
Dr. Cash $100
Cr. Revenue $100
Dr. Cost of goods sold $50
Cr. Inventory $50
How does the journal entry work for service companies such as SaaS firms that do not carry inventory?
Chapter 10 Solutions
Intermediate Accounting
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