Managerial Accounting (5th Edition)
5th Edition
ISBN: 9780134128528
Author: Karen W. Braun, Wendy M. Tietz
Publisher: PEARSON
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Textbook Question
Chapter 2, Problem 2.43AP
Determine ending inventory balances (Learning Objectives 5)
Unique Displays designs and manufactures displays used in mobile devices. Serious flooding throughout the region affected Unique Displays’ facilities. Inventory was completely ruined, and the company’s computer system, including all accounting records, was destroyed.
Before the disaster recovery specialists clean the buildings, Louise Ditchey, the company controller, is anxious to salvage whatever records she can to support an insurance claim for the destroyed inventory. She is standing in what is left of the Accounting Department with Trent Parker, the cost accountant.
“I didn’t know mud could smell so bad,” Trent says. “What should I be looking for?”
“Don’t worry about beginning inventory numbers.” responds Louise. “We’ll get them from last year’s annual report. We need first-quarter cost data.”
“I was working on the first-quarter results just before the storm hit,” Trent says. “Look, my report’s still in my desk drawer.
But all I can make out is that for the first quarter, direct material purchases were $533,000 and that direct labor, manufacturing
“Great,” says Louise, “I remember that sales for the period were approximately $1.8 million. Given our gross profit of 30%, that’s all you should need.”
Trent is not sure about that but decides to see what he can do with this information. The beginning inventory numbers are as follows:
- Raw materials, $75,000
- Work in process, $226,000
- Finished goods, $213,000
He remembers several schedules he learned in college that may help him get started.
Requirement
Use exhibits in the chapter to determine the ending inventories of raw materials, work in process, and finished goods. Assume that Raw Materials Inventory contains only direct materials.
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PowerSwitch, Inc. designs and manufactures switches used in telecommunications. Serious flooding throughout North Carolina affected Power Switch’s facilities. Inventory was completely ruined, and the company’s computer system, including all accounting records, was destroyed.
Before the disaster recovery specialists clean the buildings, Stephen Plum, the company controller, is anxious to salvage whatever records he can to support an insurance claim for the destroyed inventory. He is standing in what is left of the accounting department with Paul Lopez, the cost accountant.
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Solve the given problem: (Show your complete solution)
A mentally deranged employee, Mr. Arson, put a torch to a factory on February 20,
2018. The resulting fire completely destroyed the plant and its contents. Fortunately,
certain accounting records were kept in another building. They revealed the following for
the period December 31, 2017 to February 20, 2018:
Prime cost, P301,000
Gross Profit, P100,000 or 20% of sales
Cost of Goods Available for Sale, P460,000
Direct Materials purchased, P170,000
Work in process, December 31, 2017, P34,000
Direct materials, December 31, 2017, P16,000
Finished Goods, December 31, 2017, P30,000
Factory overhead, 40% of conversion cost
Direct Labor, P180,000
The insurance company wants to know the approximate cost of the inventories as a
basis for negotiating a settlement.
Compute for the following:
1. Direct Materials Inventory, 2/20/2018
2. Work in Process Inventory, 2/20/2018
3. Finished Goods Inventory, 2/20/2018
4. Total Manufacturing Cost
5.…
Brad Essary owned a small company that sold garden equipment. The equipment was expensive, and a perpetual system was
maintained for control purposes. Even so, lost, damaged, and stolen merchandise normally amounted to 5 percent of the inventory
balance. On June 14, Essary's warehouse was destroyed by fire. Just prior to the fire, the accounting records contained a $154,500
balance in the Inventory account. However, inventory costing $11,100 had been sold and delivered to customers but had not been
recorded in the books at the time of the fire. The fire did not affect the showroom, which contained inventory that cost $41,200.
Required
Estimate the amount of inventory destroyed by fire.
Inventory destroyed by fire
Chapter 2 Solutions
Managerial Accounting (5th Edition)
Ch. 2 - (Learning Objective 1) Which of the following...Ch. 2 - (Learning Objective 2) Which of the following is...Ch. 2 - (Learning Objective 3) A cost that can be traced...Ch. 2 - (Learning Objective 4) Period costs are often...Ch. 2 - (Learning Objective 4) Conversion costs consist of...Ch. 2 - (Learning Objective 4) Which of the following is...Ch. 2 - Prob. 7QCCh. 2 - (Learning Objective 5) Which of the following...Ch. 2 - Prob. 9QCCh. 2 - Prob. 10QC
Ch. 2 - Short Exercises S2-1 Identify types of companies...Ch. 2 - Identify type of company from balance sheets...Ch. 2 - Classify costs by value chain function (Learning...Ch. 2 - Classify costs as direct or indirect (Learning...Ch. 2 - Prime costs Cost objects Product costs Assigned...Ch. 2 - Prob. 2.6SECh. 2 - Classify product costs and period costs (Learning...Ch. 2 - Classify a manufacturers costs (Learning Objective...Ch. 2 - Classify costs incurred by a dairy processing...Ch. 2 - Determine total manufacturing overhead (Learning...Ch. 2 - Prepare a retailers income statement (Learning...Ch. 2 - Compute Cost of Goods Sold for a merchandiser...Ch. 2 - Calculate direct materials used (Learning...Ch. 2 - Compute Cost of Goods Manufactured (Learning...Ch. 2 - Describe other cost terms (Learning Objectives 6...Ch. 2 - Classify costs as fixed or variable (Learning...Ch. 2 - Prob. 2.17SECh. 2 - Classify costs along the value chain for a...Ch. 2 - Classify costs along the value chain for a...Ch. 2 - Value chain and sustainability efforts (Learning...Ch. 2 - Prob. 2.21AECh. 2 - Construct an income statement using product and...Ch. 2 - Work backward to find missing amounts (Learning...Ch. 2 - Prepare a retailers income statement (Learning...Ch. 2 - Compute direct materials used and Cost of Goods...Ch. 2 - Compute Cost of Goods Manufactured and Cost of...Ch. 2 - Continues E2-26A: Prepare income statement...Ch. 2 - Determine whether information is relevant...Ch. 2 - Prob. 2.29AECh. 2 - Classify costs along the value chain for a...Ch. 2 - Classify costs along the value chain for a...Ch. 2 - Value chain and sustainability efforts (Learning...Ch. 2 - Classify and calculate a manufacturers costs...Ch. 2 - Construct an income statement using product and...Ch. 2 - Work backward to find missing amounts (Learning...Ch. 2 - Prob. 2.36BECh. 2 - Compute direct materials used and Cost of Goods...Ch. 2 - Compute Cost of Goods Manufactured and Cost of...Ch. 2 - Continues E2-38B: Prepare income statement...Ch. 2 - Determine whether information is relevant...Ch. 2 - Prob. 2.41BECh. 2 - Classify costs along the value chain (Learning...Ch. 2 - Determine ending inventory balances (Learning...Ch. 2 - Prepare income statements (Learning Objective 5)...Ch. 2 - Prob. 2.45APCh. 2 - Prob. 2.46APCh. 2 - Classify costs along the value chain (Learning...Ch. 2 - Determine ending inventory balances (Learning...Ch. 2 - Prepare income statements (Learning Objective 5)...Ch. 2 - Prob. 2.50BPCh. 2 - Prob. 2.51BPCh. 2 - Calculate operating income (Learning Objective 5)...Ch. 2 - Prob. 2.53ACT
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