Presented below is a list of items that may or may not be reported as inventory in a company’s December 31 balance sheet. 1. Goods sold on an installment basis (bad debts can be reasonably estimated). 2. Goods out on consignment at another company’s store. 3. Goods purchased f.o.b. shipping point that are in transit at December 31. 4. Goods purchased f.o.b. destination that are in transit at December 31. 5. Goods sold to another company, for which our company has signed an agreement to repurchase at a set price that covers all costs related to the inventory. 6. Goods sold where large returns are predictable. 7. Goods sold f.o.b. shipping point that are in transit at December 31. 8. Freight charges on goods purchased. 9. Interest costs incurred for inventories that are routinely manufactured. 10. Materials on hand not yet placed into production by a manufacturing firm. 11. Costs incurred to advertise goods held for resale. 12. Office supplies. 13. Raw materials on which a manufacturing firm has started production, but which are not completely processed. 14. Factory supplies. 15. Goods held on consignment from another company. 16. Costs identified with units completed by a manufacturing firm, but not yet sold. 17. Goods sold f.o.b. destination that are in transit at December 31. 18. Short-term investments in stocks and bonds that will be resold in the near future. Instructions Indicate which of these items would typically be reported as inventory in the financial statements. If an item should not be reported as inventory, indicate how it should be reported in the financial statements.
> Where there is evidence that the utility of inventory goods, as part of their disposal in the ordinary course of business, will be less than cost, what is the proper accounting treatment?
> Deere and Company reported inventory in its balance sheet as follows: Inventories ……………………….. $1,999,100,000 What additional disclosures might be necessary to present the inventory fairly?
> The conventional retail inventory method yields results that are essentially the same as those yielded by the lower-of-cost-or-market method. Explain. Prepare an illustration of how the retail inventory method reduces inventory to market.
> Adriana Co., with annual net sales of $5 million, maintains a markup of 25% based on cost. Adriana’s expenses average 15% of net sales. What is Adriana’s gross profit and net profit in dollars?
> Distinguish between gross profit as a percentage of cost and gross profit as a percentage of sales price. Convert the following gross profit percentages based on cost to gross profit percentages based on sales price: 25% and 33 1/3%. Convert the followin
> At December 31, 2012, Ashley Co. has outstanding purchase commitments for 150,000 gallons, at $6.20 per gallon, of a raw material to be used in its manufacturing process. The company prices its raw material inventory at cost or market, whichever is lower
> Stephen Bosworth, a super salesman contemplating retirement on his fifty-fifth birthday, decides to create a fund on an 8% basis that will enable him to withdraw $25,000 per year on June 30, beginning in 2016 and continuing through 2019. To develop this
> Based on increased competition for one of its key products, Tutaj Company is concerned that it will not be able to sell its products at a price that would cover its costs. Since the company is already having a bad year, the sales manager proposes writing
> Access the glossary (“Master Glossary”) to answer the following. (a) What is the definition of inventory? (b) What is the definition of market as it relates to inventory? (c) What is the definition of net realizable value?
> What is the nature of the SEC guidance concerning inventory disclosures?
> What are the provisions for subsequent measurement of inventory in the context of a hedging transaction?
> Due to rising fuel costs, your client, Overstock.com, is considering adding a charge for shipping and handling costs on products sold through its website. What is the authoritative guidance for reporting these costs?
> Access the glossary (“Master Glossary”) to answer the following. (a) What is the definition provided for inventory? (b) What is a customer? (c) Under what conditions is a distributor considered a customer? (d) What is a product financing arrangement? Wha
> What is the nature of the SEC guidance concerning the reporting of LIFO liquidations?
> What guidance does the Codification provide concerning reporting inventories above cost?
> In this simulation, you are asked to address questions regarding inventory valuation and measurement. Prepare responses to all parts. KWW_Professional_Simulation Inventory Valuation Time Remaining 2 hours 0 minutes Unsplit Split Horiz Spit Vertical
> In conducting year-end inventory counts, your audit team is debating the impact of the client’s right of return policy both on inventory valuation and revenue recognition. The assistant controller argues that there is no need to worry about the return po
> Recently, property/casualty insurance companies have been criticized because they reserve for the total loss as much as 5 years before it may happen. The IRS has joined the debate because it says the full reserve is unfair from a taxation viewpoint. What
> Englehart Company sells two types of pumps. One is large and is for commercial use. The other is smaller and is used in residential swimming pools. The following inventory data is available for the month of March. Accounting (a) Assuming Englehart uses
> Noven Pharmaceuticals, Inc., headquartered in Miami, Florida, describes itself in a recent annual report as follows. Noven Pharmaceuticals, Inc. Noven is a place of ideas—a company where scientific excellence and state-of-the-art manufacturing combine to
> T J International was founded in 1969 as Trus Joist International. The firm, a manufacturer of specialty building products, has its headquarters in Boise, Idaho. The company, through its partnership in the Trus Joist MacMillan joint venture, develops and
> SUPERVALU reported the following data in its annual report. (a) Compute SUPERVALU’s inventory turnover ratios for 2009 and 2010, using: (1) Cost of sales and LIFO inventory. (2) Cost of sales and FIFO inventory. (b) Some firms calcula
> In January 2012, Susquehanna Inc. requested and secured permission from the commissioner of the Internal Revenue Service to compute inventories under the last-in, first-out (LIFO) method and elected to determine inventory cost under the dollar-value LIFO
> Frank Erlacher, an inventory control specialist, is interested in better understanding the accounting for inventories. Although Frank understands the more sophisticated computer inventory control systems, he has little knowledge of how inventory cost is
> Wilkens Company uses the LIFO method for inventory costing. In an effort to lower net income, company president Lenny Wilkens tells the plant accountant to take the unusual step of recommending to the purchasing department a large purchase of inventory a
> Harrisburg Company is considering changing its inventory valuation method from FIFO to LIFO because of the potential tax savings. However, the management wishes to consider all of the effects on the company, including its reported performance, before mak
> Jane Yoakam, president of Estefan Co., recently read an article that claimed that at least 100 of the country’s largest 500 companies were either adopting or considering adopting the last-in, first-out (LIFO) method for valuing inventories. The article s
> Norman’s Televisions produces television sets in three categories: portable, midsize, and flat-screen. On January 1, 2012, Norman adopted dollar-value LIFO and decided to use a single inventory pool. The company’s Janu
> Assume that Sonic Foundry Corporation has a contractual debt outstanding. Sonic has available two means of settlement: It can either make immediate payment of $3,500,000, or it can make annual payments of $400,000 for 15 years, each payment due on the la
> The management of Tritt Company has asked its accounting department to describe the effect upon the company’s financial position and its income statements of accounting for inventories on the LIFO rather than the FIFO basis during 2012
> Ehlo Company is a multiproduct firm. Presented below is information concerning one of its products, the Hawkeye. Instructions Compute cost of goods sold, assuming Ehlo uses: (a) Periodic system, FIFO cost flow. (b) Perpetual system, FIFO cost flow. (c)
> Some of the information found on a detail inventory card for Slatkin Inc. for the first month of operations is as follows. Instructions (a) From these data compute the ending inventory on each of the following bases. Assume that perpetual inventory rec
> Hull Company’s record of transactions concerning part X for the month of April was as follows. Instructions (a) Compute the inventory at April 30 on each of the following bases. Assume that perpetual inventory records are kept in unit
> Some of the transactions of Torres Company during August are listed below. Torres uses the periodic inventory method. August 10 Purchased merchandise on account, $12,000, terms 2/10, n/30. 13 Returned part of the purchase of August 10, $1,200, and receiv
> Dimitri Company, a manufacturer of small tools, provided the following information from its accounting records for the year ended December 31, 2012. Inventory at December 31, 2012 (based on physical count of goods in Dimitri’s plant, a
> The following independent situations relate to inventory accounting. 1. Kim Co. purchased goods with a list price of $175,000, subject to trade discounts of 20% and 10%, with no cash discounts allowable. How much should Kim Co. record as the cost of thes
> Richardson Company cans a variety of vegetable-type soups. Recently, the company decided to value its inventories using dollar-value LIFO pools. The clerk who accounts for inventories does not understand how to value the inventory pools using this new me
> Presented below is information related to Kaisson Corporation for the last 3 years. Instructions Compute the ending inventories under the dollar-value LIFO method for 2011, 2012, and 2013. The base period is January 1, 2011, and the beginning inventory
> On January 1, 2012, Bonanza Wholesalers Inc. adopted the dollar-value LIFO inventory method for income tax and external financial reporting purposes. However, Bonanza continued to use the FIFO inventory method for internal accounting and management purpo
> Answer the following questions. (a) On May 1, 2012, Goldberg Company sold some machinery to Newlin Company on an installment contract basis. The contract required five equal annual payments, with the first payment due on May 1, 2012. What present value c
> Thomason Company makes the following errors during the current year. (In all cases, assume ending inventory in the following year is correctly stated.) 1. Both ending inventory and purchases and related accounts payable are understated. (Assume this purc
> Chippewas Company sells one product. Presented below is information for January for Chippewas Company. Chippewas uses the FIFO cost flow assumption. All purchases and sales are on account. Instructions (a) Assume Chippewas uses a periodic system. Prep
> Wizard Industries purchased $12,000 of merchandise on February 1, 2012, subject to a trade discount of 10% and with credit terms of 3/15, n/60. It returned $3,000 (gross price before trade or cash discount) on February 4. The invoice was paid on February
> Presented below are transactions related to Guillen, Inc. May 10 Purchased goods billed at $20,000 subject to cash discount terms of 2/10, n/60. 11 Purchased goods billed at $15,000 subject to terms of 1/15, n/30. 19 Paid invoice of May 10. 24 Purchased
> Two or more items are omitted in each of the following tabulations of income statement data. Fill in the amounts that are missing. 2011 2012 2013 $ ? $290,000 6,000 Sales revenue $410,000 Sales returns and allowances 13,000 347,000 32,000 ? Net sale
> Werth Company asks you to review its December 31, 2012, inventory values and prepare the necessary adjustments to the books. The following information is given to you. 1. Werth uses the periodic method of recording inventory. A physical count reveals $23
> Bradford Machine Company maintains a general ledger account for each class of inventory, debiting such accounts for increases during the period and crediting them for decreases. The transactions below relate to the Raw Materials inventory account, which
> Assume that in an annual audit of Webber Inc. at December 31, 2012, you find the following transactions near the closing date. 1. A special machine, fabricated to order for a customer, was finished and specifically segregated in the back part of the ship
> In your audit of Garza Company, you find that a physical inventory on December 31, 2012, showed merchandise with a cost of $441,000 was on hand at that date. You also discover the following items were all excluded from the $441,000. 1. Merchandise of $61
> Alex Hardaway borrowed $90,000 on March 1, 2010. This amount plus accrued interest at 12% compounded semiannually is to be repaid March 1, 2020. To retire this debt, Alex plans to contribute to a debt retirement fund five equal amounts starting on March
> The following information relates to the Choctaw Company. Instructions Use the dollar-value LIFO method to compute the ending inventory for Choctaw Company for 2009 through 2013. Ending Inventory (End-of-Year Prices) $ 70,000 Price Date Index Decem
> Presented below is information related to Martin Company. Instructions Compute the ending inventory for Martin Company for 2009 through 2014 using the dollar-value LIFO method. Ending Inventory (End-of-Year Prices) $ 80,000 Price Date Index Decembe
> The dollar-value LIFO method was adopted by King Corp. on January 1, 2012. Its inventory on that date was $160,000. On December 31, 2012, the inventory at prices existing on that date amounted to $151,200. The price level at January 1, 2012, was 100, and
> Sisko Company has used the dollar-value LIFO method for inventory cost determination for many years. The following data were extracted from Sisko’s records. Instructions Calculate the index used for 2012 that yielded the above results
> Belanna Corporation began operations on December 1, 2012. The only inventory transaction in 2012 was the purchase of inventory on December 10, 2012, at a cost of $20 per unit. None of this inventory was sold in 2012. Relevant information is as follows.
> The following example was provided to encourage the use of the LIFO method. In a nutshell, LIFO subtracts inflation from inventory costs, deducts it from taxable income, and records it in a LIFO reserve account on the books. The LIFO benefit grows as inf
> Tom Brady Shop began operations on January 2, 2012. The following stock record card for footballs was taken from the records at the end of the year. A physical inventory on December 31, 2012, reveals that 110 footballs were in stock. The bookkeeper inf
> You are the vice president of finance of Mickiewicz Corporation, a retail company that prepared two different schedules of gross margin for the first quarter ended March 31, 2012. These schedules appear below. The computation of cost of goods sold in e
> The board of directors of Oksana Corporation is considering whether or not it should instruct the accounting department to change from a first-in, first out (FIFO) basis of pricing inventories to a last-in, first-out (LIFO) basis. The following informati
> The following is a record of Cannondale Company’s transactions for Boston Teapots for the month of May 2012. Instructions (a) Assuming that perpetual inventories are not maintained and that a physical count at the end of the month sho
> Derek Lee just received a signing bonus of $1,000,000. His plan is to invest this payment in a fund that will earn 6%, compounded annually. Instructions (a) If Lee plans to establish the DL Foundation once the fund grows to $1,898,000, how many years un
> Presented below is information related to radios for the Couples Company for the month of July. Instructions (a) Assuming that the periodic inventory method is used, compute the inventory cost at July 31 under each of the following cost flow assumption
> Esplanade Company was formed on December 1, 2011. The following information is available from Esplanade’s inventory records for Product BAP. A physical inventory on March 31, 2012, shows 1,500 units on hand. Instructions Prepare sche
> LoBianco Company’s record of transactions for the month of April was as follows. Instructions (a) Assuming that periodic inventory records are kept, compute the inventory at April 30 using (1) LIFO and (2) Average cost. (b) Assuming t
> Inventory information for Part 311 of Seminole Corp. discloses the following information for the month of June. Instructions (a) Assuming that the periodic inventory method is used, compute the cost of goods sold and ending inventory under (1) LIFO and
> The net income per books of Adamson Company was determined without knowledge of the errors indicated below. Instructions Prepare a worksheet to show the adjusted net income figure for each of the 6 years after taking into account the inventory errors.
> At December 31, 2012, Dwight Corporation reported current assets of $390,000 and current liabilities of $200,000. The following items may have been recorded incorrectly. Dwight uses the periodic method. 1. Goods purchased costing $22,000 were shipped f.o
> Arna, Inc. uses the dollar-value LIFO method of computing its inventory. Data for the past 3 years follow. Instructions Compute the value of the 2012 and 2013 inventories using the dollar-value LIFO method. Year Ended December 31 Inventory at Curre
> Bienvenu Enterprises reported cost of goods sold for 2012 of $1,400,000 and retained earnings of $5,200,000 at December 31, 2012. Bienvenu later discovered that its ending inventories at December 31, 2011 and 2012, were overstated by $110,000 and $35,000
> On December 31, 2011, the inventory of Powhattan Company amounts to $800,000. During 2012, the company decides to use the dollar-value LIFO method of costing inventories. On December 31, 2012, the inventory is $1,053,000 at December 31, 2012, prices. Usi
> What is the dollar-value method of LIFO inventory valuation? What advantage does the dollar-value method have over the specific goods approach of LIFO inventory valuation? Why will the traditional LIFO inventory costing method and the dollar-value LIFO i
> Explain how the present value of an ordinary annuity interest table is converted to the present value of an annuity due interest table.
> FIFO, weighted-average, and LIFO methods are often used instead of specific identification for inventory valuation purposes. Compare these methods with the specific identification method, discussing the theoretical propriety of each method in the determi
> In an article that appeared in the Wall Street Journal, the phrases “phantom (paper) profits” and “high LIFO profits” through involuntary liquidation were used. Explain these phrases.
> In what ways are the inventory accounts of a retailing company different from those of a manufacturing company?
> Zonker Inc. purchases 500 units of an item at an invoice cost of $30,000. What is the cost per unit? If the goods are shipped f.o.b. shipping point and the freight bill was $1,500, what is the cost per unit if Zonker Inc. pays the freight charges? If the
> Mishima, Inc. indicated in a recent annual report that approximately $19 million of merchandise was received on consignment. Should Mishima, Inc. report this amount on its balance sheet? Explain.
> As the new staff person in your company’s treasury department, you have been asked to conduct research related to a proposed transfer of receivables. Your supervisor wants the authoritative sources for the following items that are discussed in the receiv
> On December 31, 2012, Firth Company borrowed $62,092 from Paris Bank, signing a 5-year, $100,000 zero-internet-bearing note. The note was issued to yield 10% interest. Unfortunately, during 2012, Firth began to experience financial difficulty. As a resul
> What are some steps taken by both the FASB and IASB to move to fair value measurement for financial instruments? In what ways have some of the approaches differed?
> The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at http://corporate.marksandspencer.com/documents/publications/2010/Annual_Report_2010. Instructions Refer to M&S’s fi nancial state
> In this simulation, you are asked to address various requirements regarding the accounting for receivables. Prepare responses to all parts. KWW Professional Simulatilon Accounting for Receivables Time Remaining 2 hours 20 minutes Unsplit Split Horiz
> Messier Inc. manufactures cycling equipment. Recently, the vice president of operations of the company has requested construction of a new plant to meet the increasing demand for the company’s bikes. After a careful evaluation of the request, the board o
> What is the time value of money? Why should accountants have an understanding of compound interest, annuities, and present value concepts?
> The price elasticity of demand for personal computers is estimated to be −2.2. If the price of personal computers declines by 20 percent, what will be the expected percentage increase in the quantity of computers sold?
> The subway fare in your town has just been increased from a current level of 50 cents to $1.00 per ride. As a result, the transit authority notes a decline in ridership of 30 percent. Compute the price elasticity of demand for subway rides. a. If the tra
> The Olde Yogurt Factory has reduced the price of its popular Mmmm Sundae from $2.25 to $1.75. As a result, the firm’s daily sales of these sundaes have increased from 1,500 per day to 1,800 per day. Compute the arc price elasticity of demand over this pr
> Despite a decade of subsidies and considerable success in Denmark, Germany, and Britain, renewable energy in the U.S. accounts for only 7 to 8 percent of total energy consumption. Hydroelectric power remains the most successful source of renewable energy
> Specific Electric Co. asks you to implement a pay-for-performance incentive contract for its new CEO and four EVPs on the Executive Committee. The five managers can either work really hard with 70 hour weeks at a personal opportunity cost of $200,000 in
> Specific Electric Co. asks you to implement a pay-for-performance incentive contract for its new CEO and four EVPs on the Executive Committee. The five managers can either work really hard with 70 hour weeks at a personal opportunity cost of $200,000 in
> Specific Electric Co. asks you to implement a pay-for-performance incentive contract for its new CEO and four EVPs on the Executive Committee. The five managers can either work really hard with 70 hour weeks at a personal opportunity cost of $200,000 in
> Specific Electric Co. asks you to implement a pay-for-performance incentive contract for its new CEO and four EVPs on the Executive Committee. The five managers can either work really hard with 70 hour weeks at a personal opportunity cost of $200,000 in
> The manager of the aerospace division of General Aeronautics has estimated the price it can charge for providing satellite launch services to commercial firms. Her most optimistic estimate (a price not expected to be exceeded more than 10 percent of the
> Specific Electric Co. asks you to implement a pay-for-performance incentive contract for its new CEO and four EVPs on the Executive Committee. The five managers can either work really hard with 70 hour weeks at a personal opportunity cost of $200,000 in
> Two investments have the following expected returns (net present values) and standard deviation of returns: Which one is riskier? Why? PROJECT EXPECTED RE TURNS ($) STAND ARD DEVIATION (S) A 50,000 40,000 B 250,000 125,000
> The demand for MICHTEC’s products is related to the state of the economy. If the economy is expanding next year (an above-normal growth in GNP), the company expects sales to be $90 million. If there is a recession next year (a decline in GNP), sales are
> ESPN currently pays the NFL $1.1 billion per year for eight years for the right to exclusively televise Monday Night Football. What is the net present value of this investment if the parent Disney Company has an opportunity interest rate equal to its cos
> The Ajax Corporation has the following set of projects available to it: Ajax can raise funds with the following marginal costs: First $250 million……………
> Gasoline prices above $3 per gallon have affected what Enterprise Rental Car Co. can charge for various models of rental cars. SUVs are $37 with one-day return and subcompacts are $41 with one-day return. Why would the equilibrium price of SUVs be lower
> For each of the determinants of demand in Equation 2.1, identify an example illustrating the effect on the demand for hybrid gasoline-electric vehicles such as the Toyota Prius. Then do the same for each of the determinants of supply in Equation 2.2. In
