ch09 - JWCL163_ch09_01-08.qxd 8/3/09 5:21 PM Page 1 B...

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B EXERCISES E9-1B (Lower-of-Cost-or-Market) The inventory of Wei Company on December 31, 2010, consists of the following items. Part No. Quantity Cost per Unit Cost to Replace per Unit 10 900 $135 $150 11 1,500 90 78 12 750 120 114 13 300 255 270 20 600 308 312 21 a 2,400 24 14 22 450 360 352.50 a Part No. 21 is obsolete and has a realizable value of $0.20 each as scrap. Instructions (a) Determine the inventory as of December 31, 2010, by the lower-of-cost-or-market method, ap- plying this method directly to each item. (b) Determine the inventory by the lower-of-cost-or-market method, applying the method to the total of the inventory. E9-2B (Lower-of-Cost-or-Market) Wolfe Company uses the lower-of-cost-or-market method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2010, consists of prod- ucts D, E, F, G, H, and I. Relevant per-unit data for these products appear below. Item Item Item Item Item Item DE F G H I Estimated selling price $ 240 $220 $190 $180 $220 $180 Cost 150 160 160 160 100 72 Replacement cost 240 144 140 60 140 60 Estimated selling expense 60 60 60 50 60 60 Normal profit 40 40 40 40 40 40 Instructions Using the lower-of-cost-or-market rule, determine the proper unit value for balance sheet reporting pur- poses at December 31, 2010, for each of the inventory items above. E9-3B (Lower-of-Cost-or-Market) Sunshine Company follows the practice of pricing its inventory at the lower-of-cost-or-market, on an individual-item basis. Item Cost Cost to Estimated Cost of Completion Normal No. Quantity per Unit Replace Selling Price and Disposal Profit A 1,200 $8.10 $8.00 $9.00 $0.35 $0.90 B 600 6.00 5.60 6.00 0.45 0.50 C 200 5.50 5.00 7.00 0.40 1.00 D 700 7.25 7.50 8.00 0.50 0.90 E 1,000 2.10 2.00 2.80 0.65 0.20 F 500 4.05 4.00 5.00 0.40 0.75 G 2,000 8.75 8.15 9.00 0.60 0.50 H 300 9.95 9.00 10.50 0.30 1.00 Instructions From the information above, determine the amount of Sunshine Company inventory. E9-4B (Lower-of-Cost-or-Market—Journal Entries) Yousuf Company began operations in 2009 and determined its ending inventory at cost and at lower-of-cost-or-market at December 31, 2009, and December 31, 2010. This information is presented below. Cost Lower-of-Cost-or-Market 12/31/09 $ 865,000 $817,500 12/31/10 1,025,000 987,500 Instructions (a) Prepare the journal entries required at December 31, 2009, and December 31, 2010, assuming that the inventory is recorded at market, and that a perpetual inventory system (direct method) is used. (L0 1, 2) 1 JWCL163_ch09_01-08.qxd 8/3/09 5:21 PM Page 1
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(b) Prepare journal entries required at December 31, 2009, and December 31, 2010, assuming that the inventory is recorded at cost and an allowance account is adjusted at each year-end under a per- petual system. (c) Which of the two methods above provides the higher net income in each year? E9-5B (Lower-of-Cost-or-Market—Valuation Account) Presented below is information related to Webby Inc. Jan. 31 Feb. 28 Mar. 31 Apr. 30 Inventory at cost $21,500 $23,000 $19,010 $24,000 Inventory at the lower-of-cost-or-market 20,000 20,500 16,500 23,100 Purchases for the month 49,000 43,000 51,000 Sales for the month 71,000 76,000 67,000 Instructions (a) From the information, prepare (as far as the data permit) monthly income statements in colum- nar form for February, March, and April. The inventory is to be shown in the statement at cost,
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This note was uploaded on 01/08/2010 for the course BUSINESS 9418 taught by Professor Patbouker during the Spring '09 term at Nashville State Community College.

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ch09 - JWCL163_ch09_01-08.qxd 8/3/09 5:21 PM Page 1 B...

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