Intermediate Accounting, 10 Ed
10th Edition
ISBN: 9781260310177
Author: Mark W. Nelson, Wayne B. Thomas J. David Spiceland
Publisher: McGraw-Hill Education
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Chapter 9, Problem 9.8DMP
Real World Case 9–8
Various inventory issues; Chapters 8 and 9; Fred’s Inc.
• LO9–1, LO9–5, LO9–6
Real World Financials
Fred’s Inc. operates general merchandise retail discount stores and full-service pharmacies in the Southeastern United States. Access the company’s 10-K for the fiscal year ended January 30, 2016. You can find the 10-K by using EDGAR at www.sec.gov. Answer the following questions.
Required:
1. What inventory methods does Fred’s use to value its inventory?
2. Which price index does the company use in applying the retail inventory method?
3. A company that uses LIFO is allowed to provide supplemental disclosures reporting the effect of using another inventory method rather than LIFO. Using the supplemental LIFO disclosures provided by Fred’s, determine the income effect of using LIFO versus another method for the current fiscal year.
4. Calculate the company’s inventory turnover ratio for the fiscal year ended January 30, 2016.
5. Assume that in the next fiscal year the company decides to switch to the average cost method. Describe the accounting treatment required for the switch.
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Sales-related and purchase-related transactions using perpetual inventory system
Instructions Chart of Accounts
Journal
The following were selocted from among the transactions completed by Babcock Company during
November of the current year:
Nov.
3 Purchased merchandise on account from Moonlight Co., list price
$85,000, trade discount 25%, terms FOB destination, 2/10, n/30.
4
Sold merchandise for cash, $37,680. The cost of the merchandise sold
was $22,600.
5 Purchased merchandise on account from Papoose Creek Co., $47,500,
terms FOB shipping point, 2/10, n/30, with prepaid freight of $810
added to the invoice.
6.
Returned $13,500 ($18,000 list price less trade discount of 25%) of
merchandise purchased on November 3 from Moonlight Co.
8 Sold merchandise on account to Quinn Co., $15,600 with terms n/15.
The cost of the merchandise sold was $9,400.
13
Paid Moonlight Co. on account for purchase of November 3, less return
of November 6.…
Chapter 5 Problems
Sales-related transactions using perpetual inventory system.
The following selected transactions were completed by Amsterdam Supply Co., which sells office supplies primarily to wholesalers and occasionally to retail customers:
Mar. 2. Sold merchandise on account to Equinox Co., $18,900, terms FOB destination, 1/10, n/30. The cost of the merchandise sold was $13,300.
Sold merchandise for $11,350 plus 6% sales tax to retail cash customers. The cost of merchandise sold was $7,000.
Sold merchandise on account to Empire Co., $55,400, terms FOB shipping point, n/eom. The cost of merchandise sold was $33,200.
Sold merchandise for $30,000 plus 6% sales tax to retail customers who used MasterCard. The cost of merchandise sold was $19,400.
Received check for amount due from Equinox Co. for sale on March 2.
Sold merchandise to customers who used American Express cards, $13,700. The cost of merchandise sold was $8,350.
Sold merchandise on account to Targhee Co., $27,500, terms…
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Cost of merchandise sold
Inventories:
Beginning of year
eBook
Inventory Turnover and Days' Sales in Inventory
Financial statement data for years ending December 31 for Amsterdam Company follow:
End of year
20Y4
20Y3
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Inventory Turnover
20Y4
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20Y3
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20Y4
$3,598,900
593,000
648,000
a. Determine the inventory turnover for 20Y4 and 20Y3. Round to one decimal place.
Print Item
20Y3
$3,015,630
b. Determine the days' sales in inventory for 20Y4 and 20Y3. Assume 365 days a year. Round interim calculations and final answers
to one decimal place.
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589,600
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Chapter 9 Solutions
Intermediate Accounting, 10 Ed
Ch. 9 - Explain the (a) lower of cost or net realizable...Ch. 9 - What are the various levels of aggregation to...Ch. 9 - Describe the alternative approaches for recording...Ch. 9 - Explain the gross profit method of estimating...Ch. 9 - The Rider Company uses the gross profit method to...Ch. 9 - Explain the retail inventory method of estimating...Ch. 9 - Both the gross profit method and the retail...Ch. 9 - Define each of the following retail terms: initial...Ch. 9 - Explain how to estimate the average cost of...Ch. 9 - Prob. 9.10Q
Ch. 9 - Explain the LIFO retail inventory method.Ch. 9 - Discuss the treatment of freight-in, net markups,...Ch. 9 - Explain the difference between the retail...Ch. 9 - Prob. 9.14QCh. 9 - Prob. 9.15QCh. 9 - Explain the accounting treatment of material...Ch. 9 - Identify any differences between U.S. GAAP and...Ch. 9 - (Based on Appendix 9) Define purchase commitments....Ch. 9 - (Based on Appendix 9) Explain how purchase...Ch. 9 - Lower of cost or net realizable value LO91 Ross...Ch. 9 - Lower of cost or net realizable value LO91 SLR...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Prob. 9.5BECh. 9 - Gross profit method; solving for unknown LO92...Ch. 9 - Retail inventory method; average cost LO93 Kiddie...Ch. 9 - Retail inventory method; LIFO LO93 Refer to the...Ch. 9 - Conventional retail method LO94 Refer to the...Ch. 9 - Conventional retail method LO94 Roberson...Ch. 9 - Lower of cost or net realizable value LO91 Herman...Ch. 9 - Lower of cost or net realizable value LO91 The...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Prob. 9.11ECh. 9 - Concepts; terminology LO91 through LO97 Listed...Ch. 9 - Prob. 9.1PCh. 9 - Prob. 9.3PCh. 9 - Prob. 9.8PCh. 9 - Prob. 9.1DMPCh. 9 - Prob. 9.3DMPCh. 9 - Prob. 9.4DMPCh. 9 - Prob. 9.5DMPCh. 9 - Prob. 9.6DMPCh. 9 - Prob. 9.7DMPCh. 9 - Real World Case 98 Various inventory issues;...Ch. 9 - Prob. 9.9DMPCh. 9 - Judgment Case 910 Inventory errors LO97 Some...Ch. 9 - Prob. 9.12DMPCh. 9 - Prob. 2CCTC
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- Palisade Creek Co. is a merchandising business that uses the perpetual inventory system. The account balances for Palisade Creek Co. as of May 1, 2016 (unless otherwise indicated), are as follows: During May, the last month of the fiscal year, the following transactions were completed: May 1. Paid rent for May, 5,000. 3. Purchased merchandise on account from Martin Co., terms 2/10, n/30, FOB shipping point, 36,000. 4. Paid freight on purchase of May 3, 600. 6. Sold merchandise on account to Korman Co., terms 2/10, n/30, FOB shipping point, 68,500. The cost of the merchandise sold was 41,000. 7. Received 22,300 cash from Halstad Co. on account. 10. Sold merchandise for cash, 54,000. The cost of the merchandise sold was 32,000. 13. Paid for merchandise purchased on May 3. 15. Paid advertising expense for last half of May, 11,000. 16. Received cash from sale of May 6. 19. Purchased merchandise for cash, 18,700. 19. Paid 33,450 to Buttons Co. on account. 20. 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