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000 21. inventory was $214. and $265.000 21.000 . Prepare the necessary December 31 entry under: (a) The direct method.000 at market value. At January 1. Description/Account Debit Cost of goods sold Inventory (b) The indirect method. Description/Account 21. 2011.BE9-3 Kumar Inc.000 at both cost and market value.000 Debit Loss due to market decline of inventory Allowance to reduce inventory to market 21. uses a perpetual inventory system.
both cost and market value. 2011.000 .000 at cost Credit 21. the inventory was $286.000 Credit 21. At December 31.
4% .BE9-11 Ending inventory Beginning inventory Net purchases Net markups Net markdowns Total (excluding beginning inventory) Total (including beginning inventory) Deduct: Sales Ending inventory at retail $20.000 × 115% × 69.000 × 100% × 60% 20.
20.) 27.4% Ending inventory at retail deflated to base year prices: $46. Assume the price level increased from 100 at the begin year to 115 at year-end. Net purchases were $120.4% .962 Ending inventory Cost Beginning inventory Net purchases Net markups Net markdowns Total (excluding beginning inventory) Total (including beginning inventory) Deduct: Sales Ending inventory at retail Cost-to-retail ratio: $120.000.000 at reta markups were $10. had beginning inventory of $12.000 at cost and $170.215.g. and sales were $147.000 ÷ $173.000 × 100% × 60% 20. e.BE9-11 Boyne Inc. net markdowns were $7.000 × 115% × 69.g.5 and all other computations and answer to 0 decimal places. (Round computation for cost-to percentage to 1 decimal place.000. 15.000 at retail.000 ÷ 1.000 = 69.15 = $40. e. Compute ending inventory at cost using the dollar-value LIFO retail method.000 at cost and $20.000 Ending inventory at cost $20.000.
Net vel increased from 100 at the beginning of the .000 193.000 $20.000 120. (Round computation for cost-to-retail ratio al places.) 27.000 10.000 173.962 $27.000 15.000 170.000 120.962 .000 at cost and $170.000 at retail.000 -7.000 $46.000 $12.962 $ Retail $12.215. 15. e.000 $132.g.20.000 147.
assuming that the corporation had no insurance coverage. Beginning inventory $170.000 × (1 .000 Sales Purchases for the year 450.300 $131.000 -24.000 590.000 remained undamaged after the fire. Fire loss on inventory $ 131.300.E9-14 (Gross Profit Method) Castlevania Company lost most of its inventory in a fire in December just before the year-end physical inventory was taken.800 E9-14 Beginning inventory Purchases Purchase returns Goods available (at cost) Sales Sales returns Net sales Less: Gross profit (30% × $626.000 450.000 -187.000 Merchandise with a selling price of $21.800 438.000 620.000) Estimated ending inventory (unadjusted for damage) Less: Goods on handundamaged (at cost) $21.700 -5.800 . The corporation's books disclosed the following.000 had a net realizable value (after the fire) of $5. Damaged merchandise with an original selling price of $15.000 626.200 $170.000 -30.30%) Less: Goods on handdamaged (at net realizable value) Fire loss on inventory $650.000 151. Compute the amount of the loss as a result of the fire.000 Sales returns Rate of gross margin on net sales Purchase returns 30.800 -14.
ar-end physical inventory was $650.000 24.000 30% ged merchandise with an original ad no insurance coverage. .
Most of the company's desks are standard models and are sold on the basis of ca 2011. and early 2011) Sales commissions and estimated other costs of disposal 2011 catalog selling price 460 50 500 430 60 540 $450 470 $480 450 The 2011 catalog was in effect through November 2010 and the 2011 catalog is effective as of December 1. 2010. Finished Desks A B 2010 catalog selling price FIFO cost per inventory list 12/31/10 Estimated current cost to manufacture (at December 31. 2010.P9-1 (Lower-of-Cost-or-Market) Grant Wood Company manufactures desks. assuming that the co FIFO-cost-or-market approach for valuation of inventories on an individual-item basis? Item A Item B Item C Item D Lower of Cost or Market A B C D $470 450 830 960 $460 430 610 1. the following finished desks appear in the company's inventory.000 450 430 640 960 $ $ $ $ *Ceiling = 2011 catalog selling price less sales commissions and estimated other cost of disposal. . the company attempts to obtain a 20% gross margin on selling price and has usually been successful in At what amount should each of the four desks appear in the company's December 31. Generally. All catalo discounts. (2011 catalog prices are in **Floor = Ceiling less (20% × 2011 catalog selling price). 2010. inventory.
070 $350 372 640 830 $450 430 640 1. (2011 catalog prices are in effect as of 12/01/10.) . ntory.050 960 610 80 900 1. All catalog prices are net of the usual as usually been successful in doing so. assuming that the company has adopted a lower-of- $450 480 820 1.000 130 1.d are sold on the basis of catalog prices.200 ecember 1. 2010. C $900 830 D $1.000 $450 430 640 960 . At December 31.
Since beginning operations in 1978.050 Click adjustment model $ 99.650 Click adjustment model $ 117. One-half of the raw materials balance represents derailleurs acquired at a contracted price 20 percent above the raw materials is $127. These derailleurs are t the impact. Maddox applies the lower-of-cost-or-market method to each of the three types of shifters in finished goods inve Maddox applies the lowerof-cost-or-market method to the total of each inventory account. including any required no (b) Without prejudice to your answer to (a).550 Total bar end shifters $ 182.000 Total down tube shifters $ 270.000 $ 187. 1. November 30. 8. Included in the cost of factory supplies are obsolete items with an historical cost of $4. LCM. One-half of the head tube shifter finished goods inventory is held by catalog outlets on consignment. 5. retailers. 2010..000 $ 110.000 $ 266.000 $ 90.700. assume that the market value of Maddox’s inventories is less than c Maddox’s income statement for the fiscal year ended November 30. 2010.550 2. The finished goods inventory consists of the items analyzed below. 2010.000 $ 77.400. first-out cost flow in its perpetual inventory system. The balances of the inventory accounts at the end of Maddox’s fiscal year. Cost Market Down tube shifter Standard model $ 67.950 Total finished goods $ 647. and catalog outlets. Consider all amounts presented above to be material in relation to Maddox’s financial statements taken as a wh Instructions (a) Prepare the inventory section of Maddox’s balance sheet as of November 30.600 Head tube shifter Standard model $ 78.000 $ 97. Maddox has used normal absorption costing and has assumed a first-in.000 Deluxe model $ 108.000 $ 650.200. manufactures three models of gear shift components for bicycles that are sold to bicycle manufacturers. that this purchase commitment would have on Maddox’s financial statements prepared for th (CMA adapted) .000 Click adjustment model $ 94.P9-9 (Statement and Note Disclosure. 6. The total market value of the work in process inventory is $108. Three-quarters of the bar end shifter finished goods inventory has been pledged as collateral for a bank loan.000 $ 119. are shown below. The market value of 7. a division of Lost World Inc. The inventories are stated at cost before any year-end adjustments.000 Bar end shifter Standard model $ 83. 4.500 $ 67.300 Total head tube shifters $ 195. if any. 3.000 $ 196.500 $ 89. and Purchase Commitment) Maddox Specialty Company. The following information relates to Maddox’s inventory and operations. (c) Assume that Maddox has a firm purchase commitment for the same type of derailleur included in the raw ma purchase commitment is at a contracted price 15% greater than the current market price.
assume that the market value of Maddox’s inventories is less than c Maddox’s income statement for the fiscal year ended November 30.700 Derailleurs at Market Remaining Items at Market Supplies at Cost Totals 641.700 Reporting the decline in the market value of inventory below cost can be reported as follows: 1. 132. including any required no Current Assets Inventory Section (Note 1) Finished Goods (Note 2) Work-In-Process Raw Materials Factory Supplies Total Inventories 647. therefore. It can be presented on the income statement as a loss item or it can be written off. raw materials. and factory supplies.4. and one-half of the head tube shifter finished goods inventory (195. 2010.500 Note 1: Maddox applies the lower of cost (first-in.900 .500 264.000 108.000 X is pledged as collateral for a bank loan. The direct write-down of inventory 2. These derailleurs are t the impact. The creation of an Allowance Account.000 69. If the price is higher than the current .5 by catelog outlets on consignment. Note 2: Seventy-Five percent of the bar end shifter finished goods inventory in the amonnt of 136. and on total inventory basis for work-in-process.500 (182.000 X 1/2 = 132.000 Work-In-Process at Market 108.2 = 110.200 = 61. if any.000 112. (b) Without prejudice to your answer to (a).000/1.000 **65.000.000 1. increasing the cost o (c) Assume that Maddox has a firm purchase commitment for the same type of derailleur included in the raw ma purchase commitment is at a contracted price 15% greater than the current market price. first-out) or market on the finished goods. 2010.000 Bar End Shifters at Cost 182.700 *264.092.000 Head Tube Shifters at Cost 195. that this purchase commitment would have on Maddox’s financial statements prepared for th Purchase commitment are disclosed in the financial statements of the buyer.(a) Prepare the inventory section of Maddox’s balance sheet as of November 30.000 X . Calculation: Finished Goods Work-In-Process Down Tube Shifters at Market 264.
the liability on the purchase should be pres . reported in the period where the price decline takes place.as an unrealized holding loss calculated by taking the difference between the purchase price and the market price. In addition.
2010. 2010. account. The market value of the remaining factory supplies is $65.000 69. Explain how this decline would be presented in railleur included in the raw materials inventory as of November 30. dox’s inventories is less than cost. as collateral for a bank loan. 2010. of shifters in finished goods inventory. For each of the other three inventory accounts. .000 112.x Specialty Company. ancial statements taken as a whole.000 ets on consignment. The market value of the rest of the of $4. Finished goods Work in process Raw materials Factory supplies $ $ $ $ 647.500 264.200. and that the et price. 2010. Discuss cial statements prepared for the fiscal year ended November 30. cted price 20 percent above the current market price. Maddox its perpetual inventory November 30.900. including any required note(s). or bicycles that are ions in 1978. These derailleurs are to be delivered to Maddox after November 30.
500 (182. 2010. then a loss takes place. 2010.500) is held dox’s inventories is less than cost. amonnt of 136. 2010. and that the et price.700 61.700 as follows: therefore.000 X . It cannot be reported as an extraordinary item. railleur included in the raw materials inventory as of November 30. Explain how this decline would be presented in Raw Materials Factory Supplies 110. including any required note(s). These derailleurs are to be delivered to Maddox after November 30. increasing the cost of goods sold. and is reported . price is higher than the current market price.50 = 97.000 127.75) ed goods inventory (195.2010. Discuss cial statements prepared for the fiscal year ended November 30.400 61.400 237.000 X .
this must be on the purchase should be presented on the Statement of Financial Position. .ase price and the market price. To adhere to the matching priciple.
000 The building is estimated to have a 40-year life from date of completion and will be depreciated using the 150% declining-balance method. 2011. for the construction of an office building on land site number 101. the building was razed at a cost of $54. Blair Corporation purchased for $500. The building was completed and occupied on September 30.000 Architects’ fees for design and supervision 82. Shortly after acquisition. 2010.000 fixed-price contract with Slatkin Builders.000.300. The loan is payable in 10 annual installments of $300.000. legal fees of $6. The closing statement indicated that the land value was $500. specifications. Blair’s weighted-average amounts of accumulated building construction expenditures were as follows.000 a tract of land (site number 101) with a building. 100.000) Real estate broker's commission Legal fee's Title insurance Removal of old building Cost of Land Blair Corporation Cost of Building .000. 2010 $1. Building.000.000 and the building value was $100.900.P10-5 (Classification of Costs and Interest Capitalization) On January 1. Blair borrowed $3.000 For the period January 1 to September 30. Blair entered into a $3.000 Instructions (a) Prepare a schedule that discloses the individual costs making up the balance in the land account in respect of land site n (b) Prepare a schedule that discloses the individual costs that should be capitalized in the office building account as of Sept (AICPA adapted) Blair Corporation Cost of Land (Site #101) As of September 30.000 plus interest at the rate of 10%. Additional construction costs were incurred as follows. For the period March 1 to December 31. and title guarantee insurance of $18.000. 2010.000.000 on March 1. Plans. To finance construction costs.000. 2010. Blair paid a real estate broker’s commission of $36. and blueprints $21.000. on March 1. 2011 Cost of land and old building (Land 500. 2011 1. Inc.
2011 . 2011 Fixed construction contract price Plans. 2010 January 1 . specifications.December 31.September 30. and blueprints Architects' fees Interest capitalized during 2010 (See Below) Interest capitalized during 2011 (See Below) Cost of Building Interest Capitalized During 2010 and 2011 March 01 .As of September 30.
300.000 10% 3/1 .000 $ 300.000 100.000 36. ding account as of September 30. 2011.000 18.000 PLANS.000 54. Show supporting computations in good form.12/31/10 1/1 .000 714. 600. 2011.000 54.000 6.000 6.000 36.000 150% $ 3.000 .000 82.900.000 in respect of land site number 101 as of September 30.000 18.PURCHASE COMMISSION LEGAL FEES GUARANTEE INSURANCE $ $ $ $ 500.000 CLOSING STMT LAND VALUE $ BUILDING VALUE $ ACQUISITION FIXED PRICE CONTRACT $ 500.000 $ 3.000.SPEC.BLUEPRNT ARCHITECT FEE 40/Y DEPN FINANCE / BORROW 10 / ANNUAL PYMTS RATE OF INTEREST $ $ 21.000.9/30/11 $ 1.000 $ 1.
000 .423.000 1.300.000 3.000 130.000 21.000 190.3.900.000 190.000 X X 10% 10% 130.000 82.000 1.000.
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