2010 purchases (at an average cost of $24 a unit) were $960,000. The company uses the LIFO inventory method and has used it since 1985. Solution 8-155 Five thousand more units were sold than were purchased. This has resulted in the partial liquidation of the beginning LIFO inventory layers. Assuming rising prices, the increased rate of gross profit is most likely due to the matching of old, lower inventory costs against current sales. Computations Units sold: $1,800,000 ÷ $40 = 45,000 Units purchased: $960,000 ÷ $24 = 40,000 Delivered to you by tbsresources.wix.com/tbsresources
Valuation of Inventories: A Cost-Basis Approach 8 - 41 Ex. 8-156—Dollar-value LIFO method. Part A. Judd Company has a beginning inventory in year one of $300,000 and an ending inventory of $363,000. The price level has increased from 100 at the beginning of the year 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 115 which exists at the end of year two. Calculate the inventory at the end of year two continuing the use of the dollar-value LIFO method. Solution 8-156 Part A. Computation of Ending Inventory, Year One Ending Inventory Layers at Ending Inventory at Base-Year Price Base-Year Prices Price Index at Dollar-Value LIFO $363,000 ÷ 1.10 = $330,000 $300,000 × 1.00 = $300,000 $30,000 × 1.10 = 33,000 $333,000 Part B. Computation of Ending Inventory, Year Two Ending Inventory Layers at Ending Inventory at Base-Year Price Base-Year Prices Price Index at 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 $390,500 Delivered to you by tbsresources.wix.com/tbsresources
Test Bank for Intermediate Accounting, Thirteenth Edition 8 - 42 PROBLEMS Pr. 8-157—Inventory cut-off. Vogts Company sells TVs. The perpetual inventory was stated as $28,500 on the books at December 31, 2010. At the close of the year, a new approach for compiling inventory was used and apparently a satisfactory cut-off for preparation of financial statements was not made. Some events that occurred are as follows. 1. TVs shipped to a customer January 2, 2011, costing $5,000 were included in inventory at December 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 ending inventory. 5. TVs on hand that cost $6,100 were never recorded on the books. InstructionsCompute the correct inventory at December 31, 2010. Solution 8-157 Inventory per books $28,500 Add: Shipment received 12/30/10 $12,000 TVs on hand 6,100 18,100 46,600 Deduct: TVs recorded twice 4,600 TVs shipped 12/28/10 10,000 14,600 Correct inventory 12/31/10 $32,000 Delivered to you by tbsresources.wix.com/tbsresources
Valuation of Inventories: A Cost-Basis Approach 8 - 43 Pr. 8-158—Analysis of errors.
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