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Chapter 9: Question 14Q (page 474)

A fire destroys all of the merchandise of Assante Company on February 10, 2017. Presented below is information compiled up to the date of the fire. Inventory, January 1, 2017 $ 400,000 Sales revenue to February 10, 2017 1,950,000 Purchases to February 10, 2017 1,140,000 Freight-in to February 10, 2017 60,000 Rate of gross profit on selling price 40% What is the approximate inventory on February 10, 2017?

Short Answer

Expert verified

The inventory as of February 10, 2017, equals $430,000.

Step by step solution

01

Calculation of cost of goods sold

The cost of goods sold is calculated as follows:

CostofGoodsSold=SalesRevenue-Salesrevenue脳Grossprofitrate=$1,950,000-1,950,000脳40%=$1,170,000

02

Calculation of cost of goods available for sale

The cost of goods available for sale is calculated as follows:

Costofgoodsavailableforsale=BeginningInventory+Purchases+Freight-in=$400,000+$1,140,000+$60,000=$1,600,000

03

Calculation of inventory on February 10, 2017

The inventory on February 10, 2017, is calculated as follows:

InventoryonFebruary10,2017=Costofgoodsavailableforsale-Costofgoodssold=$1,600,000-$1,170,000=$430,000

Thus, the inventory on February 10, 2017, equals $430,000.

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Most popular questions from this chapter

Dover Company began operations in 2017 and determined its ending inventory at cost and at LCNRV at December 31, 2017, and December 31, 2018. This information is presented below. Cost Net Realizable Value 12/31/17 \(346,000 \)322,000 12/31/18 410,000 390,000Prepare the journal entries required at December 31, 2017, and December 31, 2018, assuming that the inventory is recorded at LCNRV and a perpetual inventory system using the cost-of-goods-sold method is used. (b) Prepare journal entries required at December 31, 2017, and December 31, 2018, assuming that the inventory is recorded at cost and a perpetual system using the loss method is used. (c) Which of the two methods above provides the higher net income in each year?

All of the following are key differences between GAAP and IFRS with respect to accounting for inventories except the: (a) definition of the lower-of-cost-or-market test for inventory valuation differs between GAAP and IFRS. (b) average-cost method is prohibited under IFRS. (c) inventory basis determination for write-downs differs between GAAP and IFRS. (d) guidelines are more principles-based under IFRS than they are under GAAP.

Question:What approaches may be employed in applying the LCNRV procedure? Which approach is normally used and why?

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, 2018. The company recomputed its ending inventory for 2017 in accordance with the procedures necessary to switch to LIFO retail. The inventory computed was \(212,600. Instructions Assuming that John Olerud Ltd.鈥檚 ending inventory for 2017 under the conventional retail inventory method was \)205,000, prepare the appropriate journal entry on January 1, 2018.

(Dollar-Value LIFO Retail) You assemble the following information for Seneca Department Store, which computes its inventory under the dollar-value LIFO method. Cost Retail Inventory on January 1, 2017 \(216,000 \)300,000 Purchases 364,800 480,000 Increase in price level for year 9% Instructions Compute the cost of the inventory on December 31, 2017, assuming that the inventory at retail is (a) \(294,300 and (b) \)365,150.
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