500000 good available for sale 750000 730000 750000

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500,000Good available for sale.....750,000730,000750,000
Ending inventory..........230,000250,000250,000Cost of goods sold.......520,000480,000500,000Gross profit....................$330,000$370,000$350,000
Exercise 6-13 (20 minutes)2016 Inventory turnover2016 Days' Sales in Inventory$426,650/[($92,500 + $87,750)/2]$87,750/$426,650 x 365 days = 75.1days= 4.7 times 2017 Inventory turnover2017 Days' Sales in Inventory$643,825/[($87,750 + $97,400)/2]= 7.0 times$97,400/$643,825 x 365 days = 55.2daysAnalysis comment: It appears that during a period of increasing sales,Palmer has been efficient in controlling its amount of inventory.Specifically, inventory turnover increased by 2.3 times (7.0 - 4.7) from2016 to 2017. In addition, days' sales in inventory decreased by 19.9days (75.1 - 55.2).Exercise 6-14A(20 minutes)EndingInventoryCost oGoods Sa. Specific identification(50 x $2.90) + (50 x $2.80) + (50 x $2.50).............$410.00$3,855 [Goods Available]- $410.00 [Ending Inventory]............b. Weighted average ($3,855/1,500 = $2.57)150 x $2.57 [rounded to cents]........................................385.50$3,855 [Goods Available]- $385.50 [Ending Inventory]............c. FIFO(150 x $2.90)..........................................................435.00(96 x $2.00) + (220 x $2.25) + (544 x $2.50) + (480 x $2.80) + (10 x 2.90)...............................d. LIFO(96 x $2.00) + (54 x $2.25).....................................313.50(160 x $2.90) + (480 x $2.80) + (544 x $2.50) + (166 x $2.25).....................................................Income effect: FIFO provides the lowest cost of goods sold, the highest gross profit, and the highest net income, which is not
unexpected during a period of rising costs.
Exercise 6-15A(20 minutes)Periodic InventoryEndingInventoryCost oGoods Sa. Specific Identification(50 x $2.80) + (10 x $2.00).....................................$160.00$2,540.00 [Goods Available]- $160.00 [Ending Inventory].......b. Weighted Average ($2,540.00/1,000 = $2.54)(60 x $2.54).............................................................152.40$2,540.00 [Goods Available]- $152.40 [Ending Inventory].......c. FIFO(22 x $2.00) + (38 x 2.30).......................................131.40(138 x $3.00) + (300 x $2.80) + (502 x $2.30).......d. LIFO(60 x $3.00).............................................................180.00(22 x $2.00) + (540 x $2.30) + (300 x $2.80) + (78 x $3.00).......................................................Income effect: FIFO results in the highest cost of goods sold, which produces the lowest gross profit andlowest net income. A lower income from using FIFO would be expected during a period of declining costs.Exercise 6-16B(20 minutes)At CostGoods available for saleBeginning inventory...................................................$ 63,800Cost of goods purchased...........................................115,060Goods available for sale.............................................$178,860Deduct net sales at retail...............................................Ending inventory at retail..............................................Cost ratio: ($178,860/$325,200) = 0.55.............................Ending inventory at cost ($65,200 x 55%)...................$ 35,860
Exercise 6-17B(20 minutes)Goods available for saleInventory, January 1...................................................$ 225,000Net cost of goods purchased*...................................802,250Goods available for sale............................................1,027,250Less estimated cost of goods soldNet sales......................................................................$1,000,000Estimated cost of goods sold[$1,000,000 x (1 – 30%)]........................................(700,000)Estimated March 31 inventory.....................................$ 327,250*$795,000 - $11,550 + $18,800 = $802,250Exercise 6-18 (15 minutes)1.Samsung generally applies the (weighted) average cost assumptionwhen assigning costs to its inventories. An exception is for itsmaterials-in-transit.2.Under IFRS, Samsung would reverse inventory valuation losses ifinventory values increased in subsequent periods. Specifically, itwould reduce inventory costs by 550 million in 2016 for thereversal. However, had Samsung followed U.S. GAAP, it would haveignored the reversal in inventory value and would not record the550 million cost reduction in 2016.
PROBLEM SET AProblem 6-1A (40 minutes)

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