33%(3)1 out of 3 people found this document helpful
This preview shows page 32 - 33 out of 68 pages.
IncorrectCorrect2009 December 31USD 72,600USD 86,2002010 December 318400070200Prepare a schedule that shows: (a) the reported net income for each year, (b) the amount ofcorrection needed for each year, and (c) the correct net income for each year.Problem B An examination of the financial records of Lanal Company on 2009 December 31,disclosed the following with regard to merchandise inventory for 2009 and prior years:2005 December 31, inventory was correct.2006 December 31, inventory was overstated USD 200,000.2007 December 31, inventory was overstated USD 100,000.2081 December 31, inventory was understated USD 220,000.2009 December 31, inventory was correct.The reported net income for each year was:2006$384,0002007544,0002008670,0002009846,000a. Prepare a schedule of corrected net income for each of the four years, 2006-2009.b. What error(s) would have been included in each December 31 balance sheet? Assume eachyear's error is independent of the other years' errors.c. Comment on the implications of your corrected net income as contrasted with reported netincome.Problem C Brett Company sells personal computers and uses the specific identification methodto account for its inventory. On 2010 November 30, the company had 46 Orange III personalcomputers on hand that were acquired on the following dates and at these stated costs:UnitsUnit costJuly 310@$10,080September 1020@$ 9,600November 2916@$10,700Brett sold 36 Orange III computers at USD 12,720 each in December. There were no purchasesof this model in December.a. Compute the gross margin on December sales of Orange III computers assuming the companyshipped those units that would maximize reported gross margin.b. Repeat part (a) assuming the company shipped those units that would minimize reportedgross margin for December.c. In view of your answers to parts (a) and (b), what would be your reaction to an assertion thatthe specific identification method should not be considered an acceptable method for costinginventory?Problem D The inventory records of Thimble Company show the following:March 1 Beginning inventory consists of 10 units costing USD 40 per unit.3 Sold 5 units at USD 94 per unit.10 Purchased 16 units at USD 48 per unit.12 Sold 8 units at USD 96 per unit.20 Sold 7 units at USD 96 per unit.25 Purchased 16 units at USD 50 per unit.31 Sold 8 units at USD 96 per unit.Assume all purchases and sales are made on credit.Using FIFO perpetual inventory procedure, prepare the appropriate journal entries for March.Problem E The following purchases and sales for Ripple Company are for April 2010. There wasno inventory on April 1.PurchasesSalesUnitUnitsCostUnitsApril 33,200@$33.00April 61,500April 101,email@example.comApril 121,400April 222,firstname.lastname@example.orgApril 252,300April 281,email@example.com. Compute the ending inventory as of 2010 April 30, using perpetual inventory procedure, undereach of the following methods: (1) FIFO, (2) LIFO, and (3) weighted-average (carry unit cost to fourdecimal places and round total cost to nearest dollar).