15 ruthie stores has 20 toasters on hand at the

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15. Ruthie Stores has 20 toasters on hand at the balance sheet data.Each cost $27.The current replacement cost is $30 per unit. Under the lower-of-cost-or-market basis of accounting for inventories, what value should Ruthie re- port for the toasters on the balance sheet? Why? 16. Mintz Company discovers in 2010 that its ending in- ventory at December 31, 2009, was $7,000 understated. What effect will this error have on (a) 2009 net income, (b) 2010 net income, and (c) the combined net income for the 2 years? 17. Willingham Company’s balance sheet shows Inventories $162,800.What additional disclosures should be made? 18. Under what circumstances might inventory turnover be too high? That is, what possible negative consequences might occur? 19. What inventory cost flow does PepsiCo use for its inventories? ( Hint: you will need to examine the notes for PepsiCo’s financial statements.) * 20. “When perpetual inventory records are kept, the results under the FIFO and LIFO methods are the same as they would be in a periodic inventory system.” Do you agree? Explain. * 21. How does the average-cost method of inventory costing differ between a perpetual inventory system and a peri- odic inventory system? * 22. When is it necessary to estimate inventories? * 23. Both the gross profit method and the retail inventory method are based on averages. For each method, indicate the average used, how it is determined, and how it is applied. * 24. Maureen Company has net sales of $400,000 and cost of goods available for sale of $300,000. If the gross profit rate is 35%, what is the estimated cost of the ending in- ventory? Show computations. * 25. Milo Shoe Shop had goods available for sale in 2008 with a retail price of $120,000. The cost of these goods was $84,000. If sales during the period were $80,000, what is the ending inventory at cost using the retail inventory method? Identify items to be included in taking a physical inventory. (SO 1) PDF Watermark Remover DEMO : Purchase from to remove the watermark
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280 Chapter 6 Inventories BE6-2 The ledger of Gomez Company includes the following items: (a) Freight-in, (b) Purchase Returns and Allowances, (c) Purchases, (d) Sales Discounts, (e) Purchase Discounts. Identify which items are included in goods available for sale. BE6-3 In its first month of operations, Quirk Company made three purchases of merchandise in the following sequence: (1) 300 units at $6, (2) 400 units at $7, and (3) 200 units at $8.Assuming there are 360 units on hand, compute the cost of the ending inventory under the (a) FIFO method and (b) LIFO method. Quirk uses a periodic inventory system. BE6-4 Data for Quirk Company are presented in BE6-3. Compute the cost of the ending in- ventory under the average-cost method, assuming there are 360 units on hand. BE6-5 The management of Hoyt Corp. is considering the effects of various inventory-costing methods on its financial statements and its income tax expense.Assuming that the price the com- pany pays for inventory is increasing, which method will: (a) provide the highest net income?
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