ORIE_3150_Homework__5_Answers_alone - ORIE 3150 Homework #5...

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ORIE 3150 Homework #5 Due February 25, 2009 Please be sure to use the score guide supplied, and ask the instructor if you have any questions. There have been several grading complaints, that one grader only takes 1 or 2 points off for something, but another grader takes off 5 points. My answer is always, well, the score guide says to take off 5 points, not much I can do now. 1. LIFO inventory costing is not allowed in the United Kingdom (UK). Thus, all companies based there use FIFO. You are examining the financial statements from Leicester Manufacturing, a UK firm. Inventory replenishment costs have varied somewhat over the past two years. Which will be more accurate, the Inventory account on the balance sheet, or the Cost of Goods Sold figure on the income statement? Explain briefly. Answer: Inventory on the balance sheet will contain the costs associated with the most recently purchases items, and as a result will be more accurate, that is, those values will more closely reflect the cost that would be paid today for those items. 2. The Boswell Boat Supply Company has three inventory items on hand. Boswell has found that the items would need to be refurbished before they could be sold, and the replacement cost of each of these items has changed. Boswell Company may need to adjust the inventory cost of the items. Find the correct cost for each item, and provide the journal entry needed (if any) to make the adjustment in their financial records. Item Number of units on hand Historical Cost per unit Replacement Cost per unit Selling Price per unit Normal Profit per unit Refurbishing Costs per unit Tension Strap 34 $80 $65 $110 $40 5 Boat Winch 28 150 120 180 70 10 Bilge Pump 18 120 80 140 60 0 TS:
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This note was uploaded on 04/19/2009 for the course ORIE 315 taught by Professor Callister during the Spring '08 term at Cornell University (Engineering School).

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ORIE_3150_Homework__5_Answers_alone - ORIE 3150 Homework #5...

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