Computations Units sold 0 Units purchased 0 8 41

Computations units sold 0 units purchased 0 8 41

This preview shows page 41 - 45 out of 52 pages.

ComputationsUnits sold: $1,800,000 ÷ $40 = 45,000Units purchased: $960,000 ÷ $24 = 40,0008 - 41
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Test Bank for Intermediate Accounting, Thirteenth EditionEx. 8-156—Dollar-value LIFO method.Part A.Judd Company has a beginning inventory in year one of $300,000 and an endinginventory of $363,000. The price level has increased from 100 at the beginning of theyear to 110 at the end of year one. Calculate the ending inventory under the dollar-value LIFO method.Part B.At the end of year two, Judd's inventory is $437,000 in terms of a price level of 115which exists at the end of year two. Calculate the inventory at the end of year twocontinuing the use of the dollar-value LIFO method.Solution 8-156Part A.Computation of Ending Inventory, Year OneEnding InventoryLayers atEnding Inventoryat Base-Year PriceBase-Year PricesPrice Indexat Dollar-Value LIFO$363,000 ÷ 1.10 = $330,000$300,000×1.00=$300,000$30,000×1.10=33,000$333,000Part B.Computation of Ending Inventory, Year TwoEnding InventoryLayers atEnding Inventoryat Base-Year PriceBase-Year PricesPrice Indexat Dollar-Value LIFO$437,000 ÷ 1.15 = $380,000$300,000×1.00=$300,000$30,000×1.10=33,000$50,000×1.15=57,500$390,5008 - 42
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Valuation of Inventories: A Cost-Basis ApproachPROBLEMSPr. 8-157—Inventory cut-off.Vogts Company sells TVs. The perpetual inventory was stated as $28,500 on the books atDecember 31, 2010. At the close of the year, a new approach for compiling inventory was usedand apparently a satisfactory cut-off for preparation of financial statements was not made. Someevents that occurred are as follows.1.TVs shipped to a customer January 2, 2011, costing $5,000 were included in inventory atDecember 31, 2010. The sale was recorded in 2011.2.TVs costing $12,000 received December 30, 2010, were recorded as received on January 2,2011.3.TVs received during 2010 costing $4,600 were recorded twice in the inventory account.4.TVs shipped to a customer December 28, 2010, f.o.b. shipping point, which cost $10,000,were not received by the customer until January, 2011. The TVs were included in the endinginventory.5.TVs on hand that cost $6,100 were never recorded on the books.InstructionsCompute the correct inventory at December 31, 2010.Solution 8-157Inventory per books$28,500Add:Shipment received 12/30/10$12,000TVs on hand6,10018,10046,600Deduct:TVs recorded twice4,600TVs shipped 12/28/1010,00014,600Correct inventory 12/31/10$32,0008 - 43
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Test Bank for Intermediate Accounting, Thirteenth EditionPr. 8-158—Analysis of errors.(All sales and purchases are on credit.) Indicate in each of the spaces provided the effect of the described errors on the various elementsof a company's financial statements. Use the following codes: O = amount is overstated; U =amount is understated; NE = no effect. Assume a periodic inventory system.AccountsAccountsCost ofReceivableInventoryPayableSalesGoods SoldEXAMPLE: Excluded goods in rentedwarehouse from inventory NEUNENEOcount._____________________________________________________________________________1.Goods in transit shipped "f.o.b.
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