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Ch.6solutions - CHAPTER6 StudyObjectives 1 2 3

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CHAPTER 6 Reporting and Analyzing Inventory Study Objectives 1. Describe the steps in determining inventory quantities. 2. Explain the basis of accounting for inventories and apply the inventory cost flow methods under a periodic inventory system. 3. Explain the financial statement and tax effects of each of the inventory cost flow assumptions. 4. Explain the lower of cost or market basis of accounting for inventories. 5. Compute and interpret the inventory turnover ratio. 6. Describe the LIFO reserve and explain its importance for comparing results of different companies. Summary of Questions by Study Objectives and Bloom’s Taxonomy Item SO BT Item SO BT Item SO BT Item SO BT Item SO BT Questions 1. 1 C 6. 2 AP 11. 2 K 16. 4 AP 21. 6 C 2. 1 K 7. 2 C 12. 3 C 17. 4 K 22. 7 C 3. 1 K 8. 2 C 13. 3 C 18. 2 K 23. 7 C 4. 1 C 9. 2 K 14. 3 C 19. 3 C 24. 8 AN 5. 1 C 10. 2 C 15. 4 C 20. 5 AN Brief Exercises 1. 1 C 3. 2 AP 5. 3 AP 7. 5 AP 9. 7 AP 2. 2 AP 4. 3 C 6. 4 AP 8. 6 C 10. 8 AN Exercises 1. 1 AN 4. 2 AN 7. 2, 3 AP 10. 5, 6 AP 13. 8 AN 2. 1 AN 5. 2 AP 8. 5 AP 11. 7 AP 14. 8 AN 3. 1 K 6. 2, 3 AN 9. 4 AP 12. 7 AP Problems: Set A 1. 1 AN 3. 2, 3 AP 5. 2, 3 AP 7. 5, 6 AP 9. 3, 7 AP 2. 2, 3 AP 4. 2, 3 AN 6. 2, 3 AP 8. 3, 7 AP Problems: Set B 1. 1 AN 3. 2, 3 AP 5. 2, 3 AP 7. 5, 6 AP 9. 3, 7 AP 2. 2, 3 AP 4. 2, 3 AN 6. 2, 3 AP 8. 3, 7 AP 6-1
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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 in a periodic inventory system, and assess financial statement effects. 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 influence earnings. Moderate 20–30 7A Compute inventory turnover ratio and days in inventory: compute current ratio based on LIFO and after adjusting for LIFO reserve. Moderate 20–30 *8A Calculate cost of goods sold and ending inventory for LIFO, FIFO, and average cost under the perpetual system; compare gross profit under each assumption. Moderate 30–40 *9A Determine ending inventory under a perpetual inventory system. Moderate 30–40 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 in a periodic inventory sys- tem, and assess financial statement effect.
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