Loading...

Messages

Proposals

Stuck in your homework and missing deadline? Get urgent help in $10/Page with 24 hours deadline

Get Urgent Writing Help In Your Essays, Assignments, Homeworks, Dissertation, Thesis Or Coursework & Achieve A+ Grades.

Privacy Guaranteed - 100% Plagiarism Free Writing - Free Turnitin Report - Professional And Experienced Writers - 24/7 Online Support

Cost accounting chapter 6 homework solutions

13/11/2021 Client: muhammad11 Deadline: 2 Day

CHAPTER 6

Inventories

ASSIGNMENT CLASSIFICATION TABLE

Learning Objectives
Questions

Brief

Exercises

Do It!

Exercises

A

Problems

B

Problems

1. Determine how to classify inventory and inventory quantities.

1, 2, 3, 4, 5, 6

1

1

1, 2

1A

1B

2. Explain the accounting for inventories and apply the inventory cost flow methods.

7, 8, 9, 10, 19

2, 3, 4

2

3, 4, 5, 6, 7, 8

2A, 3A, 4A, 5A, 6A, 7A

2B, 3B, 4B, 5B, 6B, 7B

3. Explain the financial effects of the inventory cost flow assumptions.

11, 12

5, 6

3, 6, 7, 8

2A, 3A, 4A, 5A, 6A, 7A

2B, 3B, 4B, 5B, 6B, 7B

4. Explain the lower-of- cost-or-market basis of accounting for inventories.

13, 14, 15

7

3

9, 10

5. Indicate the effects of inventory errors on the financial statements.

16

8

11, 12

6. Compute and interpret the inventory turnover.

17, 18

9

4

13, 14

*7. Apply the inventory cost flow methods to perpetual inventory records.

20, 21

10

15, 16, 17

8A, 9A

8B, 9B

*8. Describe the two methods of estimating inventories.

22, 23, 24, 25

11, 12

18, 19, 20

10A, 11A

10B, 11B

*Note: All asterisked Questions, Exercises, and Problems relate to material contained in the appendices to the chapter.

ASSIGNMENT CHARACTERISTICS TABLE

Problem

Number

Description

Difficulty

Level

Time Allotted (min.)

1A

Determine items and amounts to be recorded in inventory.

Moderate

15–20

2A

Determine cost of goods sold and ending inventory using FIFO, LIFO, and average-cost with analysis.

Simple

30–40

3A

Determine cost of goods sold and ending inventory using FIFO, LIFO, and average-cost with analysis.

Simple

30–40

4A

Compute ending inventory, prepare income statements, and answer questions using FIFO and LIFO.

Moderate

30–40

5A

Calculate ending inventory, cost of goods sold, gross profit, and gross profit rate under periodic method; compare results.

Moderate

30–40

6A

Compare specific identification, FIFO, and LIFO under periodic method; use cost flow assumption to justify price increase.

Moderate

20–30

7A

Compute ending inventory, prepare income statements, and answer questions using FIFO and LIFO.

Moderate

30–40

*8A

Calculate cost of goods sold and ending inventory for FIFO, moving-average cost, and LIFO, under the perpetual system; compare gross profit under each assumption.

Moderate

30–40

*9A

Determine ending inventory under a perpetual inventory system.

Moderate

40–50

*10A

Compute gross profit rate and inventory loss using gross profit method.

Moderate

30–40

*11A

Compute ending inventory using retail method.

Moderate

20–30

1B

Determine items and amounts to be recorded in inventory.

Moderate

15–20

2B

Determine cost of goods sold and ending inventory using FIFO, LIFO, and average-cost with analysis.

Simple

30–40

3B

Determine cost of goods sold and ending inventory using FIFO, LIFO, and average-cost with analysis.

Simple

30–40

4B

Compute ending inventory, prepare income statements, and answer questions using FIFO and LIFO.

Moderate

30–40

5B

Calculate ending inventory, cost of goods sold, gross profit, and gross profit rate under periodic method; compare results.

Moderate

30–40

6B

Compare specific identification, FIFO, and LIFO under periodic method; use cost flow assumption to influence earnings.

Moderate

20–30

ASSIGNMENT CHARACTERISTICS TABLE (Continued)

Problem

Number

Description

Difficulty

Level

Time Allotted (min.)

7B

Compute ending inventory, prepare income statements, and answer questions using FIFO and LIFO.

Moderate

30–40

*8B

Calculate cost of goods sold and ending inventory under LIFO, FIFO, and moving-average cost, under the perpetual system; compare gross profit under each assumption.

Moderate

30–40

*9B

Determine ending inventory under a perpetual inventory system.

Moderate

40–50

*10B

Compute gross profit rate and inventory loss using gross profit method.

Moderate

30–40

*11B

Compute ending inventory using retail method.

Moderate

20–30

WEYGANDT ACCOUNTING PRINCIPLES 11E

CHAPTER 6

INVENTORIES

Number

LO

BT

Difficulty

Time (min.)

BE1

1

C

Simple

4–6

BE2

2

K

Simple

2–4

BE3

2

AP

Simple

4–6

BE4

2

AP

Simple

2–4

BE5

3

AP

Simple

2–4

BE6

3

AP

Moderate

6–8

BE7

4

AP

Simple

4–6

BE8

5

AN

Simple

4–6

BE9

6

AP

Simple

4–6

BE10

7

AP

Simple

8–10

BE11

8

AP

Simple

4–6

BE12

8

AP

Simple

4–6

DI1

1

AN

Simple

4–6

DI2

2

AP

Simple

6–8

DI3

4

AP

Simple

6–8

DI4

6

AP

Simple

4–6

EX1

1

AN

Simple

4–6

EX2

1

AN

Simple

6–8

EX3

2, 3

AN, E

Moderate

6–8

EX4

2

AN, E

Simple

8–10

EX5

2

AP

Simple

6–8

EX6

2, 3

AP

Simple

8–10

EX7

2, 3

AP

Simple

8–10

EX8

2, 3

AP

Simple

6–8

EX9

4

AP

Simple

6–8

EX10

4

AP

Simple

4–6

EX11

5

AN

Simple

6–8

EX12

5

AN

Simple

10–12

EX13

6

AP

Simple

10–12

EX14

6

AP

Simple

8–10

EX15

7

AP

Simple

8–10

EX16

7

AP, E

Moderate

12–15

INVENTORIES (Continued)

Number

LO

BT

Difficulty

Time (min.)

EX17

7

AP, E

Moderate

12–15

EX18

8

AP

Simple

8–10

EX19

8

AP

Simple

10–12

EX20

8

AP

Moderate

10–12

P1A

1

AN

Moderate

15–20

P2A

2, 3

AP

Simple

30–40

P3A

2, 3

AP

Simple

30–40

P4A

2, 3

AN

Moderate

30–40

P5A

2, 3

AP, E

Moderate

30–40

P6A

2, 3

AP, E

Moderate

20–30

P7A

2, 3

AN

Moderate

30–40

P8A

7

AP, E

Moderate

30–40

P9A

7

AP

Moderate

40–50

P10A

8

AP

Moderate

30–40

P11A

8

AP

Moderate

20–30

P1B

1

AN

Moderate

15–20

P2B

2, 3

AP

Simple

30–40

P3B

2, 3

AP

Simple

30–40

P4B

2, 3

AN

Moderate

30–40

P5B

2, 3

AP, E

Moderate

30–40

P6B

2, 3

AP, E

Moderate

20–30

P7B

2, 3

AN

Moderate

30–40

P8B

7

AP, E

Moderate

30–40

P9B

7

AP

Moderate

40–50

P10B

8

AP

Moderate

30–40

P11B

8

AP

Moderate

20–30

BYP1

2, 6

AP

Simple

10–15

BYP2

6

E

Simple

10–15

BYP3

6

E

Simple

10–15

BYP4

2, 6

AN

Simple

10–15

BYP5

8

AP

Moderate

20–25

BYP6

5

AN

Simple

10–15

BYP7

3

E

Simple

10–15

BYP8

5

E

Simple

10–15

BYP9

3, 4

AP

Simple

10–15

ANSWERS TO QUESTIONS

1. Agree. Effective inventory management is frequently the key to successful business operations. Management attempts to maintain sufficient quantities and types of goods to meet expected customer demand. It also seeks to avoid the cost of carrying inventories that are clearly in excess of anticipated sales.

2. Inventory items for a merchandising company have two common characteristics: (1) they are owned by the company and (2) they are in a form ready for sale in the ordinary course of business.

3. Taking a physical inventory involves actually counting, weighing or measuring each kind of inventory on hand. Retailers, such as a hardware store, generally have thousands of different items to count. This is normally done when the store is closed.

4. (a) (1) The goods will be included in Rochelle Company’s inventory if the terms of sale are FOB destination.

(2) They will be included in Jay Company’s inventory if the terms of sale are FOB shipping point.

(b) Rochelle Company should include goods shipped to another company on consignment in its inventory. Goods held by Rochelle Company on consignment should not be included in inventory.

5. Inventoriable costs are $3,020 (invoice cost $3,000 + freight charges $50 – purchase discounts $30). The amount paid to negotiate the purchase is a buying cost that normally is not included in the cost of inventory because of the difficulty of allocating these costs. Buying costs are expensed in the year incurred.

6. FOB shipping point means that ownership of the goods in transit passes to the buyer when the public carrier accepts the goods from the seller. FOB destination means that ownership of the goods in transit remains with the seller until the goods reach the buyer.

7. Actual physical flow may be impractical because many items are indistinguishable from one another. Actual physical flow may be inappropriate because management may be able to manipulate net income through specific identification of items sold.

8. The major advantage of the specific identification method is that it tracks the actual physical flow of the goods available for sale. The major disadvantage is that management could manipulate net income.

9. No. Selection of an inventory costing method is a management decision. However, once a method has been chosen, it should be used consistently from one accounting period to another.

10. (a) FIFO.

(b) Average-cost.

(c) LIFO.

11. Gumby Company is using the FIFO method of inventory costing, and Pokey Company is using the LIFO method. Under FIFO, the latest goods purchased remain in inventory. Thus, the inventory on the balance sheet should be close to current costs. The reverse is true of the LIFO method. Gumby Company will have the higher gross profit because cost of goods sold will include a higher proportion of goods purchased at earlier (lower) costs.

Questions Chapter 6 (Continued)

12. Davey Company may experience severe cash shortages if this policy continues. All of its net income is being paid out as dividends, yet some of the earnings must be reinvested in inventory to maintain inventory levels. Some earnings must be reinvested because net income is computed with cost of goods sold based on older, lower costs while the inventory must be replaced at current, higher costs. Because of this factor, net income under FIFO is sometimes referred to as “phantom profits.”

13. Josh should know the following:

(a) A departure from the cost basis of accounting for inventories is justified when the value of the goods is lower than its cost. The writedown to market should be recognized in the period in which the price decline occurs.

(b) Market means current replacement cost, not selling price. For a merchandising company, market is the cost at the present time from the usual suppliers in the usual quantities.

14. Taylor Music Center should report the CD players at $380 each for a total of $1,900. $380 is the current replacement cost under the lower-of-cost-or-market basis of accounting for inventories. A decline in replacement cost usually leads to a decline in the selling price of the item. Valuation at LCM is conservative.

15. Bonnie Stores should report the toasters at $27 each for a total of $540. The $27 is the lower of cost or market. It is used because it is the lower of the inventory’s cost and current replacement cost.

16. (a) Kuzu Company’s 2013 net income will be understated $7,000; (b) 2014 net income will be overstated $7,000; and (c) the combined net income for the two years will be correct.

17. Ryder Company should disclose: (1) the major inventory classifications, (2) the basis of accounting (cost or lower of cost or market), and (3) the costing method (FIFO, LIFO, or average).

18. An inventory turnover that is too high may indicate that the company is losing sales opportunities because of inventory shortages. Inventory outages may also cause customer ill will and result in lost future sales.

19. Apple uses the first-in, first-out method for its inventories.

*20. Disagree. The results under the FIFO method are the same but the results under the LIFO method are different. The reason is that the pool of inventoriable costs (cost of goods available for sale) is not the same. Under a periodic system, the pool of costs is the goods available for sale for the entire period, whereas under a perpetual system, the pool is the goods available for sale up to the date of sale.

*21. In a periodic system, the average is a weighted average based on total goods available for sale for the period. In a perpetual system, the average is a moving average of goods available for sale after each purchase.

*22. Inventories must be estimated when: (1) management wants monthly or quarterly financial statements but a physical inventory is only taken annually and (2) a fire or other type of casualty makes it impossible to take a physical inventory.

Questions Chapter 6 (Continued)

*23. In the gross profit method, the average is the gross profit rate, which is gross profit divided by net sales. The rate is often based on last year’s actual rate. The gross profit rate is applied to net sales in using the gross profit method.

In the retail inventory method, the average is the cost-to-retail ratio, which is the goods available for sale at cost divided by the goods available for sale at retail. The ratio is based on current year data and is applied to the ending inventory at retail.

*24. The estimated cost of the ending inventory is $40,000:

Net sales $400,000

Less: Gross profit ($400,000 X 35%) 140,000

Estimated cost of goods sold $260,000

Cost of goods available for sale $300,000

Less: Cost of goods sold 260,000

Estimated cost of ending inventory $ 40,000

*25. The estimated cost of the ending inventory is $28,000:

Ending inventory at retail: $40,000 = ($120,000 – $80,000)

Cost-to-retail ratio: 70% =

image1.wmf
$

8

4

,

0

0

0

$

1

2

0

,

0

0

0

æ

è

ç

ö

ø

÷

Ending inventory at cost: $28,000 = ($40,000 X 70%)

SOLUTIONS TO BRIEF EXERCISES

BRIEF EXERCISE 6-1

(a) Ownership of the goods belongs to Farley. Thus, these goods should be included in Farley’s inventory.

(b) The goods in transit should not be included in the inventory count because ownership by Farley does not occur until the goods reach the buyer.

(c) The goods being held belong to the customer. They should not be included in Farley’s inventory.

(d) Ownership of these goods rests with the other company. Thus, these goods should not be included in the physical inventory.

BRIEF EXERCISE 6-2

The items that should be included in goods available for sale are:

(a) Freight-In

(b) Purchase Returns and Allowances

(c) Purchases

(e) Purchase Discounts

BRIEF EXERCISE 6-3

(a) The ending inventory under FIFO consists of 200 units at $8 + 160 units at $7 for a total allocation of $2,720 or ($1,600 + $1,120).

(b) The ending inventory under LIFO consists of 300 units at $6 + 60 units at $7 for a total allocation of $2,220 or ($1,800 + $420).

BRIEF EXERCISE 6-4

Average unit cost is $6.89 computed as follows:

300 X $6 = $1,800

400 X $7 = 2,800

200 X $8 = 1,600

900 $6,200

$6,200 ÷ 900 = $6.89 (rounded).

The cost of the ending inventory is $2,480 or (360 X $6.89).

BRIEF EXERCISE 6-5

(a) FIFO would result in the highest net income.

(b) FIFO would result in the highest ending inventory.

(c) LIFO would result in the lowest income tax expense (because it would result in the lowest net income).

(d) Average-cost would result in the most stable income over a number of years because it averages out any big changes in the cost of inventory.

BRIEF EXERCISE 6-6

Cost of good sold under:

LIFO

FIFO

Purchases

$6 X 120

$6 X 120

$7 X 200

$7 X 200

$8 X 140

$8 X 140

Cost of goods available for sale

$ 3,240

$ 3,240

Less: Ending inventory

1,140

1,400

Cost of goods sold

$ 2,100

$ 1,840

Since the cost of goods sold is $260 less under FIFO ($2,100 – $1,840) that is the amount of the phantom profit. It is referred to as “phantom profit” because FIFO matches current selling prices with old inventory costs. To replace the units sold, the company will have to pay the current price of $8 per unit, rather than the $6 per unit which some of the units were priced at under FIFO. Therefore, profit under LIFO is more representative of what the company can expect to earn in future periods.

BRIEF EXERCISE 6-7

Inventory Categories

Cost

Market

LCM

Cameras

$12,000

$12,100

$12,000

Camcorders

9,500

9,700

9,500

DVD players

14,000

12,800

12,800

Total valuation

$34,300

BRIEF EXERCISE 6-8

The understatement of ending inventory caused cost of goods sold to be overstated $7,000 and net income to be understated $7,000. The correct net income for 2014 is $97,000 or ($90,000 + $7,000).

Total assets in the balance sheet will be understated by the amount that ending inventory is understated, $7,000.

BRIEF EXERCISE 6-9

Inventory turnover:

image2.wmf
$

2

7

0

,

0

0

0

$

6

0

,

0

0

0

+

$

4

0

,

0

0

0

(

)

÷

2

=
image3.wmf
$

2

7

0

,

0

0

0

$

5

0

,

0

0

0

= 5.4
Days in inventory:

image4.wmf
3

6

5

5

.

4

= 67.6 days
*BRIEF EXERCISE 6-10

(a) FIFO Method

Product E2-D2

Date

Purchases

Cost of Goods Sold

Balance

May 7

(50 @ $10) $500

(50 @ $10) $500

June 1

(26 @ $10) $260

(24 @ $10) $240

July 28

(30 @ $13) $390

(24 @ $10)

} $630

(30 @ $13)

Aug. 27

(24 @ $10)

} $448

(16 @ $13)

(14 @ $13) $182

*BRIEF EXERCISE 6-10 (Continued)

(b) LIFO Method

Product E2-D2

Date

Purchases

Cost of Goods Sold

Balance

May 7

(50 @ $10) $500

(50 @ $10) $500

June 1

(26 @ $10) $260

(24 @ $10) $240

July 28

(30 @ $13) $390

(24 @ $10)

} $630

(30 @ $13)

Aug. 27

(30 @ $13)

} $490

(10 @ $10)

(14 @ $10) $140

(c) Average-Cost

Product E2-D2

Date

Purchases

Cost of Goods Sold

Balance

May 7

(50 @ $10) $500

(50 @ $10) $500

June 1

(26 @ $10) $260

(24 @ $10) $240

July 28

(30 @ $13) $390

(54 @ $11.67)* $630

Aug. 27

(40 @ $11.67) $467

(14 @ $11.67) $163

*($240 + $390) ÷ 54

*BRIEF EXERCISE 6-11

(1) Net sales $330,000

Less: Estimated gross profit (35% X $330,000) 115,500

Estimated cost of goods sold $214,500

(2) Cost of goods available for sale $230,000

Less: Estimated cost of goods sold 214,500

Estimated cost of ending inventory $ 15,500

*BRIEF EXERCISE 6-12

At Cost

At Retail

Goods available for sale

$38,000

$50,000

Net sales

40,000

Ending inventory at retail

$10,000

Cost-to-retail ratio = ($38,000 ÷ $50,000) = 76%

Estimated cost of ending inventory = ($10,000 X 76%) = $7,600

SOLUTIONS FOR DO IT! REVIEW EXERCISES

DO IT! 6-1

Homework is Completed By:

Writer Writer Name Amount Client Comments & Rating
Instant Homework Helper

ONLINE

Instant Homework Helper

$36

She helped me in last minute in a very reasonable price. She is a lifesaver, I got A+ grade in my homework, I will surely hire her again for my next assignments, Thumbs Up!

Order & Get This Solution Within 3 Hours in $25/Page

Custom Original Solution And Get A+ Grades

  • 100% Plagiarism Free
  • Proper APA/MLA/Harvard Referencing
  • Delivery in 3 Hours After Placing Order
  • Free Turnitin Report
  • Unlimited Revisions
  • Privacy Guaranteed

Order & Get This Solution Within 6 Hours in $20/Page

Custom Original Solution And Get A+ Grades

  • 100% Plagiarism Free
  • Proper APA/MLA/Harvard Referencing
  • Delivery in 6 Hours After Placing Order
  • Free Turnitin Report
  • Unlimited Revisions
  • Privacy Guaranteed

Order & Get This Solution Within 12 Hours in $15/Page

Custom Original Solution And Get A+ Grades

  • 100% Plagiarism Free
  • Proper APA/MLA/Harvard Referencing
  • Delivery in 12 Hours After Placing Order
  • Free Turnitin Report
  • Unlimited Revisions
  • Privacy Guaranteed

6 writers have sent their proposals to do this homework:

Top Grade Essay
Assignment Guru
Accounting & Finance Master
Finance Master
Math Guru
Helping Hand
Writer Writer Name Offer Chat
Top Grade Essay

ONLINE

Top Grade Essay

I will provide you with the well organized and well research papers from different primary and secondary sources will write the content that will support your points.

$50 Chat With Writer
Assignment Guru

ONLINE

Assignment Guru

I can assist you in plagiarism free writing as I have already done several related projects of writing. I have a master qualification with 5 years’ experience in; Essay Writing, Case Study Writing, Report Writing.

$44 Chat With Writer
Accounting & Finance Master

ONLINE

Accounting & Finance Master

I have read your project description carefully and you will get plagiarism free writing according to your requirements. Thank You

$27 Chat With Writer
Finance Master

ONLINE

Finance Master

I have written research reports, assignments, thesis, research proposals, and dissertations for different level students and on different subjects.

$48 Chat With Writer
Math Guru

ONLINE

Math Guru

I will provide you with the well organized and well research papers from different primary and secondary sources will write the content that will support your points.

$50 Chat With Writer
Helping Hand

ONLINE

Helping Hand

After reading your project details, I feel myself as the best option for you to fulfill this project with 100 percent perfection.

$37 Chat With Writer

Let our expert academic writers to help you in achieving a+ grades in your homework, assignment, quiz or exam.

Similar Homework Questions

El parque de los adirondacks está en vermont. - Application of hysteresis motor - Project kickoff meeting powerpoint presentation - Pwr ie170w pc ac datasheet - Bsbfim601 assessment answers - Answer these questions from the film from Netflix "Even the rain y tambien la lluvia" - Toms shoes in 2016 an ongoing dedication to social responsibility - Cardiac science aed beeping - MARISSA JONES ONLY!!!! - Operation anaconda battle analysis - Accounting cycle project - Dispersible aspirin 75mg tesco - C11 Lesson 4& 5 Exam SCORE 92.5 Percent - Doc martin parents guide - Power point - Receipt of keys form - Module 04 Written Assignment - Case Mix Crisis - How is aluminium extracted using electrolysis - Red bull case study marketing management - For what would a patient of german descent use cloves? - Ethanoic acid sodium hydroxide - 70 - P1 / P2 - 730 ALA (P) - Personalized CLO - Correlation coefficient calculator ti 84 - Jasper jones study notes - Which aspect of the following poem might imagists most admire - Cumulative markup percent - Gladwell something borrowed - HRM 652 EVALUATING RESULTS AND BENEFITS - Access is a dbms for midrange computers - Moodle colchester sixth form - Who is clarissa's father in reign - Competition - Nick is now seven times as old as harry - Evie artificial intelligence - Companies with wide span of control - Ucl foreign language requirement - When is rfds starting on channel 7 - Afp entry level jobs - Draft of Capstone Presentation - Summarize machiavelli's view of human nature - 1.625 as a fraction - Literary analysis essay on cry the beloved country - Reality therapy and choice theory pdf - Did macbeth kill banquo - Izod and charpy test ppt - My favorite tv show essay example - 150 canterbury road middle park - Admin Discussion Board - Halving and doubling strategy - One way manova in spss - How to calculate refractive index from critical angle - Instant displays co uk - Genius gluten free pain au chocolat - Texas government - Work environment - English - Jigsaw W6 - How can I Hire British ghost writer for my book assignment? - How to write a personal recount - Central attraction of piccadilly circus crossword clue - According to your text, the first step in minimizing your debilitative emotions is to - Competency based pay vs skill based pay - Ntu add drop period 2018 - 5x 7y 17 7x 5y 19 - Material delivery schedule template - Corporate level strategy of infosys - Ttp www1 udel edu biology ketcham microscope scope html - Phenylhydrazine test for aldehydes and ketones - Kangaroo island vehicle ferry - Benefits of product development tutor2u - Amen corner james baldwin pdf - Org_behavior Reflection, Discussion and Assignment - In the needs assessment process organizational analysis deals with identifying - Suppose stark ltd just issued a dividend of - Mcdonalds the horsley drive - Winning grants step by step pdf - Excel Assignment - Isotopes are atoms of the same element with different - Obsolete jobs of the past - Telephone script for research recruitment - Do i have repressed memories quiz - What is the difference between hindustani and carnatic music - International Business - Labyrinthelab com lrc - Physics - Cid episode abhijeet in jail part 2 - Gal door operator troubleshooting - Dive instructor job description - Avi50115 diploma of aviation air traffic control - Against nature joyce carol oates - Should doctors tell the truth collins - Scope - Chemical hazard symbols worksheet - Togaf architecture definition document example - Digital norton ebook sign in - How does hitech affect patients - Examples of delimitations in research proposal - Madeleine leininger transcultural nursing theory ppt - Models for writers twelfth edition pdf - Tasmania police scanner app