ch09 - SOLUTIONS TO B EXERCISES E9-1B (1520 minutes)...

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SOLUTIONS TO B EXERCISES E9-1B (15–20 minutes) Lower-of- Part No. Quantity Per Unit Total Cost Total Market Cost-or- Market Cost Market 10 900 $135 $150.00 $121,500 $135,000 $121,500 11 1,500 90 78.00 135,000 117,000 117,000 12 750 120 114.00 90,000 85,500 85,500 13 300 255 270.00 76,500 81,000 76,500 20 600 308 312.00 184,800 187,200 184,800 21 2,400 24 14.00 57,600 33,600 33,600 22 450 360 352.50 162,000 158,625 158,625 Totals $827,400 $797,925 $777,525 (a) $777,525. (b) $797,925. E9-2B (10–15 minutes) Item Net Realizable Value (Ceiling) Net Realizable Value Less Normal Profit (Floor) Replacement Cost Designated Market Cost LCM D $180* $140** $240 $180 $150 $150 E 160 120 144 144 160 144 F 130 90 140 130 160 130 G 130 90 60 90 160 90 H 160 120 140 140 100 100 I 120 80 60 80 72 72 *Estimated selling price—Estimated selling expense = $240 – $60 = $180. **$180 – $40 = $140. 9-1
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E9-3B (10–15 minutes) (a) 12/31/06 Cost of Goods Sold. ............................. 47,500 Inventory. ..................................... 47,500 12/31/07 Cost of Goods Sold. ............................. 37,500 Inventory. ..................................... 37,500 (b) 12/31/06 Loss Due to Market Decline of Inventory. ........................................... 47,500 Allowance to Reduce Inventory to Market. .................................. 47,500 12/31/07 Allowance to Reduce Inventory to Market. ........................................... 10,000* Recovery of Loss Due to Market Decline of Inventory. ... 10,000 *Cost of inventory at 12/31/06 $865,000 Lower-of-cost-or-market at 12/31/06 (817,500 ) Allowance amount needed to reduce inventory to market (a) $ 47,500 Cost of inventory at 12/31/07 $1,025,000 Lower-of-cost-or-market at 12/31/07 (987,500 ) Allowance amount needed to reduce inventory to market (b) $ 37,500 Recovery of previously recognized loss = (a) – (b) = $47,500 – $37,500 = $10,000 (c) Both methods of recording lower-of-cost-or-market adjustments have the same effect on net income. 9-2
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E9-4B (12–17 minutes) Total estimated selling price: Lounge chairs, 80 X $45 $3,600 Armchairs, 60 X $40 2,400 Straight chairs, 140 X $25 3,500 $9,500 Sales during 2007: 40 X $45 $1,800 20 X $40 800 24 X $25 600 $3,200 Ratio of cost to selling price, $5,985 ÷ $9,500 63% Gross profit realized in 2007, (100% – 63%) X $3,200 $1,184 Inventory on December 31, 2007, $5,985 – ($3,200 X 63%) $3,969 E9-5B (5 minutes) Unrealized Holding Loss—Income (Purchase Commitments). .................................................... 15,000 Estimated Liability on Purchase Commitments. ........................................... 15,000 9-3
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E9-6B (15–20 minutes) (a) If the commitment is material in amount, there should be a footnote in the balance sheet stating the nature and extent of the commitment. The footnote may also disclose the market price of the materials. The
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This note was uploaded on 05/10/2010 for the course ACC 440 BSB1568 taught by Professor Warwick during the Spring '09 term at University of Phoenix.

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ch09 - SOLUTIONS TO B EXERCISES E9-1B (1520 minutes)...

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