in-lab _6 inventory with solution

in-lab _6 inventory with solution - total inventory basis....

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
ACCT 401L Lab Assignment #6 Name____________________ Date 2/25/11 Problem 1: On January 1, 2011, the Vandervelde Furniture Company adopted the dollar-value LIFO method of computing inventory. An internal cost index is used to convert ending inventory to base year. Inventory on January 1 was $200,000. Year-end inventories at year-end costs and cost indexes for its one inventory pool were as follows: Required: Compute inventory amounts at the end of each year. Solution to Problem 1:
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Problem 2: Keune Co. has 3 products in its inventory. Information about the December 31, 2010 inventory follows. Product Quantity Historical Cost Replacement Cost Selling Price X 1,000 $10 $12 $16 Y 600 14 12 13 Z 800 15 11 18 The selling/disposal costs for each product consist of a 15% sales commission. The normal profit margin for each product is 40% of its estimated selling price. 1. Determine the amount at which inventory should be reported on Keune’s balance sheet at December 31, 2010, assuming the lower of cost or market rule is applied on a
Background image of page 2
Background image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: total inventory basis. 2. Assuming that Keune recognizes inventory write downs using the indirect method, what would be the journal entry that Keune makes to record the loss if there had been no previous write-downs of inventory? 3. Repeat Part #2, but now assume that the balance in the allowance account is $1,000 prior to the 12/31/2010 LCM determination. What would the journal entry be to record the loss? Solution to problem 2: 1. Product Cost Design MKT X 1,000*$10=10,000 1,000*$12 =12,000 Y 600*$14=8,400 600*11.05=6,630 Z 800*15=12,000 800*11=8,800 $30,400 $27,430 LCM 2. Cost Market=30,400-27,430=2,970 Journal entry: Debt: loss due to LCM adjustment 2,970 Credit: Allowance or Inventory 2,970 3. 2,970 required allowance 1,000 balance 1,970 adjustment needed Journal entry: Debt: loss due to LCM adjustment 1,970 Credit: allowance 1,970...
View Full Document

Page1 / 3

in-lab _6 inventory with solution - total inventory basis....

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online