Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Chapter 21, Problem 11RQ
To determine
Identify the misstatements in the valuation of the December 31, 2019, for the deluxe binders assuming FIFO
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Included in the December 31, 2023, inventory of the Night Owl Supply Company are 2,800 deluxe ring binders in the amount of $8,488. An examination of the most recent acquisitions of binders
showed the following costs: January 26, 2024, 2,400 at $3.05 each; December 6, 2023, 2,100 at $3.02 each; November 26, 2023, 2,600 at $2.78 each. What is the misstatement in valuation of the
December 31, 2023, inventory for deluxe ring binders, assuming FIFO inventory valuation? What would your answer be if the January 26, 2024, acquisition was for 2,400 binders at $2.84 each?
What is the misstatement in valuation of the December 31, 2023, inventory for deluxe ring binders, assuming FIFO inventory valuation?
Using FIFO, the 12/31/23 inventory balance for deluxe ring binders should be
8,288
The ending inventory balance of $8,488 at 12/31/23 is
overstated
200
The amount of the misstatement is
What would your answer be if the January 26, 2024, acquisition was for 2,400 binders at $2.84 each?
If the…
The inventory on hand at the end of 2019 for Reddall Company is valued at a cost of $95,000. The following items were not included in this inventory: 1. Purchased goods in transit, under terms FOB shipping point, invoice price $4,200, freight costs $200. 2. Goods out on consignment to Marlman Company, sales price $5,600, shipping costs of $200. 3. Goods sold to Grina Co. under terms FOB destination, invoiced for $1,900 which included $178 freight charges to deliver.
Determine the cost of the ending inventory that Reddall should report on its December 31, 2019, balance sheet, assuming that its selling price is 140% of the cost of the inventory.
Cast Iron Grills, Incorporated, manufactures premium gas barbecue grills. The company reports inventory and cost of goods sold based on calculations from a LIFO periodic inventory system. Cast Iron’s December 31, 2024, fiscal year-end inventory consisted of the following (listed in chronological order of acquisition):
Units
Unit Cost
6,200
$ 300
4,600
400
7,200
500
The replacement cost of the grills throughout 2025 was $600. Cast Iron sold 33,000 grills during 2025. The company's selling price is set at 200% of the current replacement cost.
Required:
1. & 2. Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2025 under two different assumptions. First, that Cast Iron purchased 34,000 units and, second, that Cast Iron purchased 18,000 units during the year.
4. Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2025 assuming that Cast Iron purchased 34,000 units (as per the first assumption) and…
Chapter 21 Solutions
Auditing And Assurance Services
Ch. 21 - Prob. 1RQCh. 21 - Prob. 2RQCh. 21 - Prob. 3RQCh. 21 - Prob. 4RQCh. 21 - Prob. 5RQCh. 21 - Prob. 6RQCh. 21 - Prob. 7RQCh. 21 - Prob. 8RQCh. 21 - Prob. 9RQCh. 21 - Prob. 10RQ
Ch. 21 - Prob. 11RQCh. 21 - Each employee of the Gedding Manufacturing Co., a...Ch. 21 - Prob. 13.1MCQCh. 21 - Prob. 13.2MCQCh. 21 - Prob. 13.3MCQCh. 21 - Prob. 14.1MCQCh. 21 - Prob. 14.2MCQCh. 21 - Prob. 14.3MCQCh. 21 - Prob. 15.1MCQCh. 21 - Prob. 15.2MCQCh. 21 - Prob. 15.3MCQCh. 21 - Prob. 16DQPCh. 21 - Prob. 17DQPCh. 21 - Prob. 18DQPCh. 21 - Prob. 19DQPCh. 21 - Prob. 20DQPCh. 21 - Prob. 21DQPCh. 21 - Prob. 22DQPCh. 21 - Prob. 23DQPCh. 21 - Prob. 24DQPCh. 21 - Prob. 25DQPCh. 21 - Prob. 26DQPCh. 21 - Prob. 27DQPCh. 21 - Prob. 28DQPCh. 21 - Prob. 29DQPCh. 21 - Prob. 30C
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- Cast Iron Grills, Incorporated, manufactures premium gas barbecue grills. The company reports inventory and cost of goods sold based on calculations from a LIFO periodic inventory system. Cast Iron's December 31, 2024, fiscal year-end inventory consisted of the following (listed in chronological order of acquisition): Units 8,600 5,800 9,600 Unit Cost $ 900 1,000 1,100 The replacement cost of the grills throughout 2025 was $1,200. Cast Iron sold 45,000 grills during 2025. The company's selling price is set at 200% of the current replacement cost. Required: 1. & 2. Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2025 under two different assumptions. First, that Cast Iron purchased 46,000 units and, second, that Cast Iron purchased 24,000 units during the year. 4. Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2025 assuming that Cast Iron purchased 46,000 units (as per the first assumption) and 24,000…arrow_forwardThe Cecil Booker Vending Company changed is method of valuing inventory from the average cost method to the FIFO cost method at the beginning of 2021. At December 31, 2020, inventories were $130,000 (average cost basis) and were $134,000 a year earlier. Cecil-Booker’s accountants determined that the inventories would have totaled $175,000 at December 31, 2020, and $180,000 at December 31, 2019, if determined on a FIFO basis. A tax rate of 25% is in effect for all years. One hundred thousand common shares were outstanding each year. Income from continuing operations was $500,000 in 2020 and $625,000 in 2021. There were no discontinued operations either year. Required: Prepare the journal entry at January 1, 2021, to record the change in accounting principle. (All tax effects should be reflected in the deferred tax liability account) Prepare the 2021-2020 comparative income statements beginning with income from continuing operations (adjusted for any revisions) include per share…arrow_forwardThe Cecil-Booker Vending Company changed its method of valuing inventory from the average cost method to the FIFO cost method at the beginning of 2021. At December 31, 2020, inventories were $121,000 (average cost basis) and were $125,000 a year earlier. Cecil-Booker’s accountants determined that the inventories would have totaled $157,000 at December 31, 2020, and $162,000 at December 31, 2019, if determined on a FIFO basis. A tax rate of 25% is in effect for all years. One hundred thousand common shares were outstanding each year. Income from continuing operations was $410,000 in 2020 and $535,000 in 2021. There were no discontinued operations either year. Required:1. Prepare the journal entry at January 1, 2021, to record the change in accounting principle. (All tax effects should be reflected in the deferred tax liability account.)2. Prepare the 2021–2020 comparative income statements beginning with income from continuing operations (adjusted for any revisions). Include per share…arrow_forward
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