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Chapter 9: Question 13BE (page 475)
Use the information for Boyne Inc. from BE9-10, 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
The ending inventory at cost equals $27,952.80.
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Presented below is information related to Rembrandt Inc.鈥檚 inventory, assuming Rembrandt uses lower-of-LIFO cost-or-market. (per unit) Skis Boots Parkas Historical cost \(190.00 \)106.00 $53.00 Selling price 212.00 145.00 73.75 Cost to distribute 19.00 8.00 2.50 Current replacement cost 203.00 105.00 51.00 Normal profit margin 32.00 29.00 21.25 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 cost amount that should be used in the lower-of-cost-or-market comparison of boots, and (c) the market amount that should be used to value parkas on the basis of the lower-of-cost-or-market.
Question:What method(s) might be used in the accounts to record a loss due to a price decline in the inventories? Discuss
Fiedler Co. follows the practice of valuing its inventory at the lower-ofcost-or-market. The following information is available from the company鈥檚 inventory records as of December 31, 2017. Item Quantity Unit Cost Replacement Cost/Unit Estimated Selling Price/Unit Completion & Disposal Cost/Unit Normal Profit Margin/Unit A 1,100 \(7.50 \)8.40 \(10.50 \)1.50 $1.80 B 800 8.20 7.90 9.40 0.90 1.20 C 1,000 5.60 5.40 7.20 1.15 0.60 D 1,000 3.80 4.20 6.30 0.80 1.50 E 1,400 6.40 6.30 6.70 0.70 1.00Instructions Greg Forda is an accounting clerk in the accounting department of Fiedler Co., and he cannot understand why the market value keeps changing from replacement cost to net realizable value to something that he cannot even figure out. Greg is very confused, and he is the one who records inventory purchases and calculates ending inventory. You are the manager of the department and an accountant. (a) Calculate the lower-of-cost-or-market using the individual-item approach. (b) Show the journal entry he will need to make in order to write down the ending inventory from cost to market. (c) Write a memo to Greg explaining what designated market value is as well as how it is computed. Use your calculations to aid in your explanation
Referring to the situation in P9-2 for Garcia Home Improvement Company, consider the following expanded data at May 31, 2017. Assume Garcia uses LIFO inventory costing. Problems 483 Replacement Sales Net Realizable Normal Cost Cost Price Value Profi t Aluminum siding \( 70,000 \) 62,500 \( 64,000 \) 56,000 \( 5,100 Cedar shake siding 86,000 79,400 94,000 84,800 7,400 Louvered glass doors 112,000 124,000 186,400 168,300 18,500 Thermal windows 140,000 126,000 154,800 140,000 15,400 Total \)408,000 \(391,900 \)499,200 \(449,100 \)46,400 Instructions (a) (1) Determine the proper balance in Allowance to Reduce Inventory to Market at May 31, 2017. (2) For the fiscal year ended May 31, 2017, determine the amount of the gain or loss that would be recorded due to the change in Allowance to Reduce Inventory to Market. (b) Explain the rationale for the use of the lower-of-cost-or-market rule as it applies to inventories
As of January 1, 2017, Aristotle Inc. adopted the retail method of accounting for its merchandise inventory. To prepare the store鈥檚 financial statements at June 30, 2017, you obtain the following data. Cost Selling Price Inventory, January 1 \( 30,000 \) 43,000 Markdowns 10,500 Markups 9,200 Markdown cancellations 6,500 Markup cancellations 3,200 Purchases 104,800 155,000 Sales revenue 154,000 Purchase returns 2,800 4,000 Sales returns and allowances 8,000 Instructions (a) Prepare a schedule to compute Aristotle鈥檚 June 30, 2017, inventory under the conventional retail method of accounting for inventories. (b) Without prejudice to your solution to part (a), assume that you computed the June 30, 2017, inventory to be $59,400 at retail and the ratio of cost to retail to be 70%. The general price level has increased from 100 at January 1, 2017, to 108 at June 30, 2017. Prepare a schedule to compute the June 30, 2017, inventory at the June 30 price level under the dollarvalue LIFO retail method. (AICPA adapted)
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