S6_PLE_Inventories - ACCTG 620 | Fall 2011 S6 PLE –...

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Unformatted text preview: ACCTG 620 | Fall 2011 S6 PLE – Inventories Name: _______________________ Scenario: Blank Corp. (BC) sells one product, surfboard blanks, which it purchases from various suppliers around the world. BC’s trial balance at December 31, 2010, included the following accounts. Account 12/31/2010 Sales (33,000 units @ $16) Sales discounts Purchases Purchase discounts Freight-in Freight-out $528,000 7,500 368,900 18,000 5,000 11,000 BC’s inventory purchases during the year were as follows: Units 8,000 Beg. inventory, Jan. 1 Purchases, quarters ended March 31 June 30 September 30 December 31 Totals 12,000 15,000 13,000 7,000 55,000 Cost per unit $8.20 Total cost $ 65,600 8.25 7.90 7.50 7.70 99,000 118,500 97,500 53,900 $434,500 The following additional information relates BC’s inventory accounting: • BC’s accounting policy is to report inventory in its financial statements at the lower of cost or market, applied to total inventory. Cost is determined using the last-in, first-out (LIFO method). BC uses a periodic inventory system. • BC has determined that on December 31, 2010, the replacement cost of its inventory was $8 per unit and the net realizable value was $8.80 per unit. BC’s normal profit margin is $1.05 per unit. Part 1: Prepare a supporting schedule of ending inventory for the year ended Dec. 31, 2010. ACCTG 620 | Fall 2011 S6 PLE Page 1 Blank Corp. Supporting Schedule of Ending Inventory For the Year Ended December 31, 2010 Cost per Units unit Total cost Beg. inventory, Jan. 1 Purchases, quarters ended: Totals Part 2: Prepare the journal entry, if needed, to reflect the application of LCM under US GAAP. [Note: BC uses the direct method of reporting losses from the impairment of inventory] Part 3: Prepare the BC’s schedule of costs of goods sold for the year ended Dec. 31, 2010. Blank Corp. Schedule of Costs of Goods Sold For the Year Ended December 31, 2010 Beg. inventory, Jan. 1 Purchases Purchase discounts Freight Goods available for sale Ending inventory Costs of goods sold Part 4: Define “market” as it relates to the application of the lower-of-cost or market rule under U.S. GAAP. ACCTG 620 | Fall 2011 S6 PLE Page 2 ...
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This note was uploaded on 04/04/2012 for the course ACCTG 620 taught by Professor Staff during the Spring '08 term at San Diego State.

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