Horngren's Accounting (12th Edition)
12th Edition
ISBN: 9780134486444
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 6, Problem S6.1SE
Determining inventory accounting principles
Learning Objective 1
Ward Hardware used the FIFO inventory costing method in 2018. Ward plans to continue using the FIFO method in future years. Which accounting principle is most relevant to Ward’s decision?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
5- Inventory Cost Flow
Assumptions
LEARNING OBJECTIVE: Differentiate between the
key characteristics of the four inventory valuation
methods.
Which of the following descriptions corresponds
with the weighted average inventory valuation
method?
a.) Matches cost of items purchased against
cost of items in inventory
b.) Disregards when inventory was purchased
c.) Inventory purchased first has a greater
weight than inventory purchased later
d.) Tends to be used for inventories of large,
unique items
SUBMIT MY ANSWER
Defining Chapter Terms
Terms and phrases relating to concepts discussed in this chapter along with descriptions of those terms and phrases follow. Match each term, 1 through 15, with the best description a through o.
Key Inventory Terms and Phrases
Key Inventory Terms and Phrases
Description of Terms and Phrases
Answerabcdefghijklmno
1. Net realizable value
a. Requires retroactive restatement of financial statements
Answerabcdefghijklmno
2. Lower-of-cost-or-market
b. Method for valuing inventory applying to LIFO and retail methods
Answerabcdefghijklmno
3. Allowance to reduce inventory to net realizable value
c. Cancellation of additional markup
Answerabcdefghijklmno
4. Gross profit method
d. Inventory estimation that is not acceptable under GAAP
Answerabcdefghijklmno
5. Estimated loss on purchase commitment
e. Method that approximates lower-of-cost-or-market
Answerabcdefghijklmno
6. Change in inventory method from average to FIFO
f. Not usually practical to…
Learning Objective 2: Compare ending inventory and cost of goods sold—FIFOvs. LIFO) Paulson’s specializes in sound equipment. Company records indicate the followingdata for a line of speakers:Unit Cost$4964JunDate12713ItemBalance...................Purchase.................Sale ........................Sale ........................Quantity18376Sale Price$115103Requirements1. Determine the amounts that Paulson’s should report for cost of goods sold and endinginventory two ways:a. FIFOb. LIFO2. Paulson’s uses the FIFO method. Prepare the company’s income statement for the monthended June 30, 2018, reporting gross profit. Operating expenses totaled $340, and theincome tax rate was 35%.
Chapter 6 Solutions
Horngren's Accounting (12th Edition)
Ch. 6 - Which principle or concept states that business...Ch. 6 - Which inventory costing method assigns to ending...Ch. 6 - Assume Nile.com began April with 14 units of...Ch. 6 - Suppose Nile.com used the weighted-average...Ch. 6 - Which inventory costing method results in the...Ch. 6 - Which of the following is most closely linked to...Ch. 6 - At December 31, 2018, Stevenson Company overstated...Ch. 6 - Suppose Maestro’s had cost of goods sold during...Ch. 6 - Suppose used the LIFO inventory costing method and...Ch. 6 - Prob. 1RQ
Ch. 6 - Prob. 2RQCh. 6 - Prob. 3RQCh. 6 - Prob. 4RQCh. 6 - Discuss some measures that should be taken to...Ch. 6 - Under a perpetual inventory system, what are the...Ch. 6 - When using a perpetual inventory system and the...Ch. 6 - During periods of rising costs, which inventory...Ch. 6 - What does the lower-of-cost-or market (LCM) rule...Ch. 6 - What account is debited when recording the...Ch. 6 - What is the effect on cost of goods sold, gross...Ch. 6 - When does an inventory error cancel out, and why?Ch. 6 - How is inventory turnover calculated, and what it...Ch. 6 - How is days’ sales inventory calculated, and what...Ch. 6 - When using the periodic inventory system, which...Ch. 6 - When using periodic inventory system and...Ch. 6 - Determining inventory accounting principles...Ch. 6 - Determining inventory costing methods Learning...Ch. 6 - Preparing a perpetual Inventory record and journal...Ch. 6 - Preparing a perpetual inventor, record and journal...Ch. 6 - Preparing a perpetual inventor record and journal...Ch. 6 - Preparing a perpetual inventory record and journal...Ch. 6 - Comparing Cost of Goods Sold under FIFO, LIFO, and...Ch. 6 - Applying the lower-of-cost-or-market rule Learning...Ch. 6 - Determining the effect of an inventory error...Ch. 6 - Computing the rate of inventory turnover and days’...Ch. 6 - Computing periodic inventory amounts—FIFO Learning...Ch. 6 - Computing periodic inventory amounts—LIFO Learning...Ch. 6 - Computing periodic inventory...Ch. 6 - Using accounting vocabulary Learning Objective 1,...Ch. 6 - Comparing inventory methods Learning Objective 2...Ch. 6 - Measuring and journalizing merchandise inventory...Ch. 6 - Measuring and journalizing merchandise inventory...Ch. 6 - Measuring ending inventory and cost of goods sold...Ch. 6 - Comparing amounts for cost of goods sold, ending...Ch. 6 - Comparing cost of goods sold and gross...Ch. 6 - Applying the lower-of-cost-or-market rule to...Ch. 6 - Applying the lower-of-cost-or-market rule to...Ch. 6 - Measuring the effect of an inventory error...Ch. 6 - Correcting an inventory error-two years Learning...Ch. 6 - Computing inventory turnover and days’ sales in...Ch. 6 - Comparing ending merchandise inventory, cost of...Ch. 6 - Computing periodic inventory amounts Learning...Ch. 6 - Accounting for inventory using the perpetual...Ch. 6 - Accounting for inventory using the perpetual...Ch. 6 - Accounting principles for inventory and applying...Ch. 6 - Prob. P6.31APGACh. 6 - Prob. P6A.32APGACh. 6 - Prob. P6.33BPGBCh. 6 - Prob. P6.34BPGBCh. 6 - Accounting principles for inventory and applying...Ch. 6 - Prob. P6.36BPGBCh. 6 - Prob. P6A.37BPGBCh. 6 - Prob. P6.38CTCh. 6 - Prob. P6.39CPCh. 6 - Prob. P6.40PSCh. 6 - Prob. 1CPCh. 6 - Prob. 2CPCh. 6 - Prob. 3CPCh. 6 - Prob. 4CPCh. 6 - Prob. 5CPCh. 6 - Prob. 6CPCh. 6 - Prob. 7CPCh. 6 - Prob. 8CPCh. 6 - Prob. 9CPCh. 6 - Prob. 10CPCh. 6 - Prob. 11CPCh. 6 - Prob. 6.1TIATCCh. 6 - Prob. 6.1DCCh. 6 - Prob. 6.1FSC
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- need solution for the problem p-22-3 from the book INTERMEDIATE ACCOUNTING AND REPORTING BY JAMES WAHLEN (3RD edition) Koopman company began operations on january 1 2018,and uses FIFO inventory method.... problem attached as pictures Required: Prepare the 2020 Financial Statementsarrow_forwardClick to watch the Tell Me More Learning Objective 7 video and then answer the questions below. 1. The total units to be produced in a period is calculated as a. estimated units sold plus desired ending inventory less estimated beginning inventory b. estimated units sold less desired ending inventory add estimated beginning inventory c. estimated units sold plus desired ending inventory plus estimated beginning inventory d. estimated units sold less desired ending inventory less estimated beginning inventory b 2. Cost of goods sold is calculated as a. beginning finished goods inventory plus cost of goods manufactured less beginning finished goods inventory b. beginning finished goods inventory plus cost of goods manufactured plus beginning finished goods inventory c. beginning finished goods inventory less cost of goods manufactured less beginning finished goods inventory d. beginning finished goods inventory less cost of goods manufactured plus beginning finished goods inventory d…arrow_forwardAssume the perpetual inventory system is used unless stated otherwise. Determining inventory accounting principles Ward Hardware used the FIFO inventory costing method in 2018. Ward plans to continue using the FIFO method in future years. Which accounting principle is most relevant to Ward’s decision?arrow_forward
- years ended June 30, 2019 and 2018: Cost of Goods Available for Sale Nature Foods Grocery reported the following comparative income statements for the Beginning Merchandise Inventory Less: Ending Merchandise Inventory During 2019, Nature Foods Grocery discovered that ending 2018 merchandise inven- inventory error-two years an Merchandise Inventory 361 Learning Objective 5 1.2019, NI $36,500 NATURE FOODS GROCERY Income Statements Years Ended June 30, 2019 and 2018 2019 Net Sales Revenue Cost of Goods Sold: 2018 $ 134,000 $ 119,000 $ 17,000 78,000 $ 14,000 67,000 81,000 Net Cost of Purchases 95,000 18,000 17,000 Cost of Goods Sold 77,000 64,000 57,000 Gross Profit 55,000 Operating Expenses 26,000 21,000 $ 31,000 Net Income $ 34,000 tory was overstated by $5,500. Requirements 1. Prepare corrected income statements for the two years. 2. 2 State whether each year's net income-before your corrections-is understated or overstated, and indicate the amount of the understatement or…arrow_forwardLesson 7: Valuing Inventory 11. Describe how to find inventory value using the average cost method.arrow_forwardEffects of Inventory Costing Methods Jefferson Enterprises has the following income statement data available for 2019: Jefferson uses a perpetual inventory accounting system and the average cost method. Jefferson is considering adopting the FIFO or LIFO method for costing inventory. Jeffersons accountant prepared the following data: Required: 1. Compute income before taxes, income taxes expense, and net income for each of the three inventory costing methods. (Round to the nearest dollar.) 2. CONCEPTUAL CONNECTION Why are the cost of goods sold and ending inventory amounts different for each of the three methods? What do these amounts tell us about the purchase price of inventory during the year? 3. CONCEPTUAL CONNECTION Which method produces the most realistic amount for net income? For inventory? Explain your answer.arrow_forward
- E QUIZ: INVENTORIESPROBLEM SC X : Classwork for 2nd Sem IT Tools ir X Copy of Dark Astronomy Thesis X 4 My Drive - Google Drive il/u/0/#inbox?projector=1 PROBLEM 6: XXX Company is preparing its 2021 financial statements. Prior to any adjustments, inventory is valued at P1,605,000. The following information has been found relating to certain inventory transactions from your cut-off test: A. Goods valued at P110,000 are on consignment with a customer. These goods were not included in the ending inventory figure. B. Goods costing P87,000 were received from a vendor on January 5, 2022. The related invoice was received and recorded on January 12, 2022. The goods were shipped on December 31, 2021, terms FOB shipping point. C. Goods costing P85,000, sold for P102,000, were shipped on December 31, 2021, and were delivered to the customer on January 2, 2022. The terms of the invoice were FOB shipping point. The goods were included in the ending inventory for 2021 and the sale was recorded in…arrow_forwardE6A-27 Computim Learning Objective 7 Appendix 6A ventory Consider the data of the following companies which use the PEHOUI system: Beginning Merchandise Inventory Ending Merchandise Inventory Cost of Goods Sold Net Cost of Net Sales Gross Profit Purchases Company Revenue $ 105,000 $ 23,000 $ 59,000 $ 22,000 24 (a) $ 45,000 Large Small (b) 27,000 94,000 (c) 99,000 40,000 Medium 96,000 (d) 58,000 24,000 68,000 (e) Petite 80,000 8,000 (f) 6,500 (g) 44,000 Requirements 1. Supply the missing amounts in the preceding table. 2. Prepare the income statement for the year ended December 31, 2019, for Large Company, which uses the periodic inventory system. Include a complete headıng and show the full computation of cost of goods sold. Large's operating expenses for the year were $12,000.arrow_forwardPROBLEM 1. Wharf Company uses a perpetual inventory system and values its inventory at lower of cost or market. Its accounting records indicate the following information relating to inventory: Inventory Cost $ 60,000 Date January 1, 2019 December 31, 2019 December 31, 2020 Market $ 60,000 102,000 88,000 115,000 109,000 Required: Prepare the required journal entries at December 31, 2019, and December 31, 2020, to record the inventory at lower of cost or market using the following methods: a. Direct method b. Allowance methodarrow_forward
- erms and phrases relating to concepts discussed in this chapter along with descriptions of those terms and phrases follow. Match each term, 1 through 15, with the best description a through o. Key Inventory Terms and Phrases Key Inventory Terms and Phrases Description of Terms and Phrases Answerabcdefghijklmno 1. Net realizable value a. Requires retroactive restatement of financial statements Answerabcdefghijklmno 2. Lower-of-cost-or-market b. Method for valuing inventory applying to LIFO and retail methods Answerabcdefghijklmno 3. Allowance to reduce inventory to net realizable value c. Cancellation of additional markup Answerabcdefghijklmno 4. Gross profit method d. Inventory estimation that is not acceptable under GAAP Answerabcdefghijklmno 5. Estimated loss on purchase commitment e. Method that approximates lower-of-cost-or-market Answerabcdefghijklmno 6. Change in inventory method from average to FIFO f. Not usually practical to retroactively restate or adjust…arrow_forward3. EX.07.04.ALGO (Algorithmic) Perpetual Inventory Using LIFO Beginning inventory, purchases, and sales data for portable game players are as follows: Apr. 1 Inventory 69 units @ $93 10 Sale 52 units 15 Purchase 84 units @ $99 20 Sale 48 units 24 Sale 13 units 30 Purchase 37 units @ $103 The business maintains a perpetual inventory system, costing by the last-in, first-out method. Determine the cost of merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 4. Under LIFO, if units are in inventory at two different costs, enter the units with the HIGHER unit cost first in the Cost of Merchandise Sold Unit Cost column and LOWER unit cost first in the Inventory Unit Cost column.arrow_forwardPlease assist with the Value of closing inventory using the first-in-first-out (FIFO) method1. Value of issues to production using the first-in-first-out (FIFO) method 2. Value of closing inventory using the weighted average cost methodarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Century 21 Accounting Multicolumn Journal
Accounting
ISBN:9781337679503
Author:Gilbertson
Publisher:Cengage
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Chapter 6 Merchandise Inventory; Author: Vicki Stewart;https://www.youtube.com/watch?v=DnrcQLD2yKU;License: Standard YouTube License, CC-BY
Accounting for Merchandising Operations Recording Purchases of Merchandise; Author: Socrat Ghadban;https://www.youtube.com/watch?v=iQp5UoYpG20;License: Standard Youtube License