The inventory of 3T Company on December 31, 2014, consists of the following items.
(a) Determine the inventory as of December 31, 2014, by the lower-of-cost-or-market method, applying this method directly to each item.
(b) Determine the inventory by the lower-of-cost-or-market method, applying the method to the total of the inventory.
> Prophet Company signed a long-term purchase contract to buy timber from the U.S. Forest Service at $300 per thousand board feet. Under these terms, Prophet must cut and pay $6,000,000 for this timber during the next year. Currently, the market value is $
> Olson Corporation, a retailer and wholesaler of national brand-name household lighting fixtures, purchases its inventories from various suppliers. Instructions (a) (1) What criteria should be used to determine which of Olson’s costs are invento
> Saurez Company, your client, manufactures paint. The company’s president, Maria Saurez, has decided to open a retail store to sell Saurez paint as well as wallpaper and other supplies that would be purchased from other suppliers. She has asked you
> Ogala Corporation purchased a significant amount of raw materials inventory for a new product that it is manufacturing. Ogala uses the lower-of-cost-or-market rule for these raw materials. The replacement cost of the raw materials is above the net realiz
> The market value of Lake Corporation’s inventory has declined below its cost. Sheryl Conan, the controller, wants to use the loss method to write down inventory because it more clearly discloses the decline in market value and does not distort the
> You have been asked by the financial vice president to develop a short presentation on the lower-of-cost-or-market method for inventory purposes. The financial VP needs to explain this method to the president because it appears that a portion of the comp
> Presented below is information related to Langston Hughes Corporation. Instructions Compute the ending inventory under the dollar-value LIFO method at December 31, 2015. The cost-to retail ratio for 2015 was 60%.
> Davenport Department Store converted from the conventional retail method to the LIFO retail method on January 1, 2014, and is now considering converting to the dollar-value LIFO inventory method. During your examination of the financial statements for th
> Diderot Stores Inc., which uses the conventional retail inventory method, wishes to change to the LIFO retail method beginning with the accounting year ending December 31, 2014. Amounts as shown below appear on the store’s books before adjustment.
> Late in 2011, Joan Seceda and four other investors took the chain of Becker Department Stores private, and the company has just completed its third year of operations under the ownership of the investment group. Andrea Selig, controller of Becker Departm
> As of January 1, 2014, Aristotle Inc. installed the retail method of accounting for its merchandise inventory. To prepare the store’s financial statements at June 30, 2014, you obtain the following data. Instructions (a) Prepare a schedule to co
> Fiedler Co. follows the practice of valuing its inventory at the lower-of-cost-or-market. The following information is available from the company’s inventory records as of December 31, 2014. InstructionsGreg Forda is an accounting clerk in the a
> Maddox Specialty Company, a division of Lost World Inc., manufactures three models of gear shift components for bicycles that are sold to bicycle manufacturers, retailers, and catalog outlets. Since beginning operations in 1990, Maddox has used normal ab
> Fuque Inc. uses the retail inventory method to estimate ending inventory for its monthly financial statements. The following data pertain to a single department for the month of October 2015. Instructions (a) Using the conventional retail method, prep
> Presented below is information related to Waveland Inc. InstructionsAssuming that Waveland Inc. uses the conventional retail inventory method, compute the cost of its ending inventory at December 31, 2015.
> The records for the Clothing Department of Sharapova’s Discount Store are summarized below for the month of January. Inventory, January 1: at retail $25,000; at cost $17,000 Purchases in January: at retail $137,000; at cost $82,500 Freight-in: $
> On April 15, 2015, fire damaged the office and warehouse of Stanislaw Corporation. The only accounting record saved was the general ledger, from which the trial balance below was prepared. The following data and information have been gathered.1. The f
> The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at http://annualreport.marksandspencer.com/_assets/downloads/Marks-and-Spencer-Annual-report-and-financial-statements-2012.
> What method(s) might be used in the accounts to record a loss due to a price decline in the inventories? Discuss.
> Remmers Company manufactures desks. Most of the company’s desks are standard models and are sold on the basis of catalog prices. At December 31, 2014, the following finished desks appear in the company’s inventory. The 2014 catalog was in
> John Olerud Ltd., a local retailing concern in the Bronx, New York, has decided to change from the conventional retail inventory method to the LIFO retail method starting on January 1, 2015. The company recomputed its ending inventory for 2014 in accorda
> Connie Chung Corporation adopted the dollar-value LIFO retail inventory method on January 1, 2013. At that time the inventory had a cost of $54,000 and a retail price of $100,000. The following information is available. The price index at January 1, 2
> Amiras Corporation began operations on January 1, 2014, with a beginning inventory of $30,100 at cost and $50,000 at retail. The following information relates to 2014. Instructions (a) Assume Amiras decided to adopt the conventional retail method. Com
> Presented below is information related to Langston Hughes Corporation. Instructions Compute the ending inventory under the dollar-value LIFO method at December 31, 2015. The cost-to retail ratio for 2015 was 60%.
> You assemble the following information for Seneca Department Store, which computes its inventory under the dollar-value LIFO method. Instructions Compute the cost of the inventory on December 31, 2014, assuming that the inventory at retail is(a) $294,
> Leonard Bernstein Company began operations late in 2013 and adopted the conventional retail inventory method. Because there was no beginning inventory for 2013 and no markdowns during 2013, the ending inventory for 2013 was $14,000 under both the convent
> Helen Keller Company began operations on January 1, 2013, adopting the conventional retail inventory system. None of the company’s merchandise was marked down in 2013 and, because there was no beginning inventory, its ending inventory for 2013 of $
> The financial statements of ConAgra Foods, Inc.’s 2012 annual report disclose the following information. Instructions Compute ConAgra’s(a) Inventory turnover and(b) The average days to sell inventory for 2012 and 2011.
> The records of Ellen’s Boutique report the following data for the month of April. Instructions Compute the ending inventory by the conventional retail inventory method.
> In some instances, accounting principles require a departure from valuing inventories at cost alone. Determine the proper unit inventory price in the following cases.
> Presented below is information related to Ricky Henderson Company. Instructions Compute the inventory by the conventional retail inventory method.
> Presented below is information related to Bobby Engram Company. Instructions(a) Compute the ending inventory at retail.(b) Compute a cost-to-retail percentage (round to two decimals) under the following conditions.(1) Excluding both markups and markdo
> Presented below is information related to Aaron Rodgers Corporation for the current year. Instructions Compute the ending inventory, assuming that(a) Gross profit is 45% of sales;(b) Gross profit is 60% of cost;(c) Gross profit is 35% of sales; and(d)
> Gheorghe Moresan Lumber Company handles three principal lines of merchandise with these varying rates of gross profit on cost. On August 18, a fire destroyed the office, lumber shed, and a considerable portion of the lumber stacked in the yard. To fil
> You are called by Tim Duncan of Spurs Co. on July 16 and asked to prepare a claim for insurance as a result of a theft that took place the night before. You suggest that an inventory be taken immediately. The following data are available. Your client
> Rasheed Wallace Company lost most of its inventory in a fire in December just before the year-end physical inventory was taken. The corporation’s books disclosed the following. Merchandise with a selling price of $21,000 remained undamaged after
> Tim Legler requires an estimate of the cost of goods lost by fire on March 9. Merchandise on hand on January 1 was $38,000. Purchases since January 1 were $72,000; freight-in, $3,400; purchase returns and allowances, $2,400. Sales are made at 331/3% abov
> Mark Price Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May. Instructions (a) Compute the estimated inventory at May 31, assuming that the gross profit is 30
> Each of the following gross profit percentages is expressed in terms of cost. 1. 20%. 2. 25%. 3. 331/3%. 4. 50%. Instructions Indicate the gross profit percentage in terms of sales for each of the above.
> At December 31, 2014, Indigo Girls Company has outstanding non-cancelable purchase commitments for 36,000 gallons, at $3.00 per gallon, of raw material to be used in its manufacturing process. The company prices its raw material inventory at cost or mark
> What approaches may be employed in applying the lower-of-cost-or-market procedure? Which approach is normally used and why?
> Marvin Gaye Company has been having difficulty obtaining key raw materials for its manufacturing process. The company therefore signed a long-term non-cancelable purchase commitment with its largest supplier of this raw material on November 30, 2014, at
> Phil Collins Realty Corporation purchased a tract of unimproved land for $55,000. This land was improved and subdivided into building lots at an additional cost of $34,460. These building lots were all of the same size but owing to differences in locatio
> Winans Company uses the lower-of-cost-or-market method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2013, included product X. Relevant per-unit data for product X appear below. There were 1,000 units of p
> Presented below is information related to Candlebox Enterprises. Instructions(a) From the information, prepare (as far as the data permit) monthly income statements in columnar form for February, March, and April. The inventory is to be shown in the s
> Corrs Company began operations in 2013 and determined its ending inventory at cost and at lower-of-cost-or-market at December 31, 2013, and December 31, 2014. This information is presented below. Instructions (a) Prepare the journal entries required a
> Michael Bolton Company follows the practice of pricing its inventory at the lower-of-cost-or-market, on an individual-item basis. Instructions From the information above, determine the amount of Bolton Company inventory.
> Smashing Pumpkins Company uses the lower-of-cost-or-market method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2014, consists of products D, E, F, G, H, and I. Relevant per-unit data for these products appea
> Use the information for Boyne Inc. from BE9-8, and assume the price level increased from 100 at the beginning of the year to 115 at year-end. Compute ending inventory at cost using the dollar-value LIFO retail method. In BE9-8 Boyne Inc. had beginning in
> Why are inventories valued at the lower-of-cost-or market? What are the arguments against the use of the LCM method of valuing inventories?
> Use the information for Boyne Inc. from BE9-8. Compute ending inventory at cost using the LIFO retail method. In BE9-8 Boyne Inc. had beginning inventory of $12,000 at cost and $20,000 at retail. Net purchases were $120,000 at cost and $170,000 at retail
> In its 2012 annual report, Gap Inc. reported inventory of $1,615 million on January 25, 2012, and $1,620 million on January 29, 2011, cost of sales of $9,275 million for fiscal year 2012, and net sales of $14,549 million. Compute Gap’s inventory tu
> Boyne Inc. had beginning inventory of $12,000 at cost and $20,000 at retail. Net purchases were $120,000 at cost and $170,000 at retail. Net markups were $10,000; net markdowns were $7,000; and sales revenue was $147,000. Compute ending inventory at cost
> Fosbre Corporation’s April 30 inventory was destroyed by fire. January 1 inventory was $150,000, and purchases for January through April totaled $500,000. Sales revenue for the same period were $700,000. Fosbre’s normal gross profit percentag
> Use the information for Kemper Company from BE9-5. In 2015, Kemper paid $1,000,000 to obtain the raw materials which were worth $950,000. Prepare the entry to record the purchase. In BE9-5 Kemper Company signed a long-term noncancelable purchase commitme
> Kemper Company signed a long-term non-cancelable purchase commitment with a major supplier to purchase raw materials in 2015 at a cost of $1,000,000. At December 31, 2014, the raw materials to be purchased have a market value of $950,000. Prepare any nec
> Bell, Inc. buys 1,000 computer game CDs from a distributor who is discontinuing those games. The purchase price for the lot is $8,000. Bell will group the CDs into three price categories for resale, as indicated below. Determine the cost per CD for ea
> Kumar Inc. uses a perpetual inventory system. At January 1, 2014, inventory was $214,000 at both cost and market value. At December 31, 2014, the inventory was $286,000 at cost and $265,000 at market value. Prepare the necessary December 31 entry under
> Floyd Corporation has the following four items in its ending inventory. Determine the final lower-of-cost-or-market inventory value for each item.
> Presented below is information related to Rembrandt Inc.’s inventory. Determine the following:(a) The two limits to market value (i.e., the ceiling and the floor) that should be used in the lower-of-cost-or-market computation for skis,(b) The co
> Explain the rationale for the ceiling and floor in the lower of cost or market method of valuing inventories.
> Of what significance is inventory turnover to a retail store?
> 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?
> (a) Determine the ending inventory under the conventional retail method for the furniture department of Mayron Department Stores from the following data. (b) If the results of a physical inventory indicated an inventory at retail of $295,000, what inf
> 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.
> What conditions must exist for the retail inventory method to provide valid results?
> A fire destroys all of the merchandise of Assante Company on February 10, 2014. Presented below is information compiled up to the date of the fire. What is the approximate inventory on February 10, 2014?
> 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 331/3%. Convert the fol
> What are the major uses of the gross profit method?
> What are reversing entries, and why are they used?
> Why should caution be exercised in the use of the net income figure derived in an income statement? What are the objectives of generally accepted accounting principles in their application to the income statement?
> Distinguish between cash-basis accounting and accrual basis accounting. Why is accrual-basis accounting acceptable for most businesses and the cash-basis unacceptable in the preparation of an income statement and a balance sheet?
> Wayne Rogers Corp. maintains its financial records on the cash basis of accounting. Interested in securing a long-term loan from its regular bank, Wayne Rogers Corp. requests you as its independent CPA to convert its cash-basis income statement data to
> Kehoe, Inc. owes $40,000 to Ritter Company. How much would Kehoe have to pay each year if the debt is retired through four equal payments (made at the end of the year), given an interest rate on the debt of 12%? (Round to two decimal places.)
> What are the primary characteristics of an annuity? Differentiate between an “ordinary annuity” and an “annuity due.”
> Identify three situations in which accounting measures are based on present values. Do these present value applications involve single sums or annuities, or both single sums and annuities? Explain.
> When the accounts of Daniel Barenboim Inc. are examined, the adjusting data listed below are uncovered on December 31, the end of an annual fiscal period. 1. The prepaid insurance account shows a debit of $5,280, representing the cost of a 2-year fire
> At the end of its first year of operations, the trial balance of Alonzo Company shows Equipment $30,000 and zero balances in Accumulated Depreciation—Equipment and Depreciation Expense. Depreciation for the year is estimated to be $2,000. Prepare
> Included in Gonzalez Company’s December 31 trial balance is a note receivable of $12,000. The note is a 4-month, 10% note dated October 1. Prepare Gonzalez’s December 31 adjusting entry to record $300 of accrued interest, and the February 1
> Dresser Company’s weekly payroll, paid on Fridays, totals $8,000. Employees work a 5-day week. Prepare Dresser’s adjusting entry on Wednesday, December 31, and the journal entry to record the $8,000 cash payment on Friday, January 2.
> LaBouche Corporation owns a warehouse. On November 1, it rented storage space to a lessee (tenant) for 3 months for a total cash payment of $2,400 received in advance. Prepare LaBouche’s November 1 journal entry and the December 31 annual adjusti
> Assume that on February 1, Procter & Gamble (P&G) paid $720,000 in advance for 2 years’ insurance coverage. Prepare P&G’s February 1 journal entry and the annual adjusting entry on June 30.
> Using the data in BE3-3, journalize the entry on July 1 and the adjusting entry on December 31 for Zubin Insurance Co. Zubin uses the accounts Unearned Service Revenue and Service Revenue.
> On July 1, 2014, Crowe Co. pays $15,000 to Zubin Insurance Co. for a 3-year insurance policy. Both companies have fiscal years ending December 31. For Crowe Co., journalize the entry on July 1 and the adjusting entry on December 31.
> Agazzi Repair Shop had the following transactions during the first month of business as a proprietorship. Journalize the transactions. (Omit explanations.) Aug. 2 Invested $12,000 cash and $2,500 of equipment in the business. 7 Purchased supplies on
> What is interest cost? Briefly describe imputation of interest.
> What guidance does the SEC provide for public companies with respect to the reporting of the “effect of preferred stock dividends and accretion of carrying amount of preferred stock on earnings per share”?
> What distinguishes an item that is “unusual in nature” from an item that is considered “extraordinary”?
> Access the glossary (“Master Glossary”) to answer the following. (a) What is a change in accounting estimate? (b) How is a change in accounting principle distinguished from a “change in accounting estimate effected by a change in ac
> How can earnings management affect the quality of earnings?
> The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at http://annualreport.marksandspencer.com/_assets/downloads/Marks-and-Spencer-Annual-report-and-financial-statements-20
> Your client took accounting a number of years ago and was unaware of comprehensive income reporting. He is not convinced that any accounting standards exist for comprehensive income. Instructions Access the IFRS authoritative literature at the IASB w
> Presented below is information related to Viel Company at December 31, 2014, the end of its first year of operations. Instructions Compute the following: (a) income from operations, (b) net income, (c) net income attributable to Viel Company cont
> Willie Nelson, Jr., controller for Jenkins Corporation, is preparing the company’s financial statements at year-end. Currently, he is focusing on the income statement and determining the format for reporting comprehensive income. During the year,
> As audit partner for Grupo and Rijo, you are in charge of reviewing the classification of unusual items that have occurred during the current year. The following material items have come to your attention. 1. A merchandising company incorrectly overst
> Simpson Corp. is an entertainment firm that derives approximately 30% of its income from the Casino Knights Division, which manages gambling facilities. As auditor for Simpson Corp., you have recently overheard the following discussion between the cont
> Charlie Brown, controller for Kelly Corporation, is preparing the company’s income statement at year-end. He notes that the company lost a considerable sum on the sale of some equipment it had decided to replace. Since the company has sold equipm
> Bobek Inc. has recently reported steadily increasing income. The company reported income of $20,000 in 2011, $25,000 in 2012, and $30,000 in 2013. A number of market analysts have recommended that investors buy the stock because they expect the steady
> What is earnings management?