E8-13
Altira Corporation uses a periodic inventory system. The following information related to its merchandise inventory during the month of August 2011 is available:
Aug 1 Inventory on hand - 2,000 units; cost $6.10 each.
Aug 8 Purchased 10,000 units for $5.50 each.
Aug 14 Sold 8,000 units for $12.00 each.
Aug 18 Purchased 60,000 units for $5.00 each.
Aug 25 Sold 7,000 units for $11.00 each.
Aug 31 Inventory on hand – 3,000 units.
Required:
Determine the inventory balance Altira would report in its August 31, 2011, balance sheet and the cost of goods sold it would report in its August 2011 income statement using each of the following cost flow methods:
1. First-in, First-out (FIFO)
2. Last-in, First-out (LIFO)
3. Average Cost
E8-14
[This is a variation of Exercise 8-13 modified to focus on the perpetual inventory system and alternative cost flow methods.]
Altira Corporation uses a perpetual inventory system. The following transactions affected its merchandise inventory during the month of August 2011:
Aug 1 Inventory on hand – 2,000 units; cost $6.10 each.
Aug 8 Purchased 10,000 units for $5.50 each
Aug 14 Sold 8,000 units for $12.00 each
Aug 18 Purchased 6,000 units for $5.00 each
Aug 25 Sold 7,000 units for $11.00 each.
Aug 31 Inventory on hand – 3,000 units.
Required:
Determine the inventory balance Altira would report in its August 31, 2011 balance sheet and the cost of goods sold it would report in its August 2011 income statement using each of the following cost flow methods:
1. First-in, First-out (FIFO)
2. Last-in, First-out (LIFO)
3. Average Cost
E8-18
Steelcase, Inc. is the global leader in providing furniture for office environments. The company uses the LIFO inventory method for external reporting and for income tax purposes but maintains its internal records using FIFO. The following disclosure note was included in a recent annual report:
5. Inventories ($in millions)
February 27, 2009
February 29, 2008
Raw Materials
$61.3
$67.5
Work-in-Process
15.9
20.9
Finished Goods
79.9
87.9
157.1
176.3
LIFO reserve
(27.2)
(29.6)
$129.9
$146.7
The company’s income statement reported cost of goods sold of $2,236.7 million for the fiscal year ended February 27, 2009.
Required:
1. Steelcase adjusts the LIFO reserve at the end of its fiscal year. Prepare the February 27, 2009 adjusting entry to make the cost of goods sold adjustment.
2. If Steelcase had used FIFO to value its inventories, what would cost of goods sold have been for the 2009 fiscal year?
P 8-5
Ferris Company began 2011 with 6,00o units of its principal product. The cost of each unit is $8. Merchandise transactions for the month of January 2011 are as follows:
Purchases
Date of Purchase
Units
Unit Cost*
Total Cost
Jan. 10
5,000
$9
$45,000
Jan. 18
6,000
10
60,000
Totals
11,000
$105,000
*Includes purchase price and cost of freight.
Sales
Date of Sale
Units
Jan. 5
3,000
Jan. 12
2,000
Jan. 20
4,000
Total
9,000
8,000 units were on hand at th ...
E8-13Altira Corporation uses a periodic inventory system. The fo.docx
1. E8-13
Altira Corporation uses a periodic inventory system. The
following information related to its merchandise inventory
during the month of August 2011 is available:
Aug 1 Inventory on hand - 2,000 units; cost $6.10 each.
Aug 8 Purchased 10,000 units for $5.50 each.
Aug 14 Sold 8,000 units for $12.00 each.
Aug 18 Purchased 60,000 units for $5.00 each.
Aug 25 Sold 7,000 units for $11.00 each.
Aug 31 Inventory on hand – 3,000 units.
Required:
Determine the inventory balance Altira would report in its
August 31, 2011, balance sheet and the cost of goods sold it
would report in its August 2011 income statement using each of
the following cost flow methods:
1. First-in, First-out (FIFO)
2. Last-in, First-out (LIFO)
3. Average Cost
E8-14
[This is a variation of Exercise 8-13 modified to focus on the
perpetual inventory system and alternative cost flow methods.]
Altira Corporation uses a perpetual inventory system. The
following transactions affected its merchandise inventory
during the month of August 2011:
Aug 1 Inventory on hand – 2,000 units; cost $6.10 each.
Aug 8 Purchased 10,000 units for $5.50 each
Aug 14 Sold 8,000 units for $12.00 each
Aug 18 Purchased 6,000 units for $5.00 each
Aug 25 Sold 7,000 units for $11.00 each.
2. Aug 31 Inventory on hand – 3,000 units.
Required:
Determine the inventory balance Altira would report in its
August 31, 2011 balance sheet and the cost of goods sold it
would report in its August 2011 income statement using each of
the following cost flow methods:
1. First-in, First-out (FIFO)
2. Last-in, First-out (LIFO)
3. Average Cost
E8-18
Steelcase, Inc. is the global leader in providing furniture for
office environments. The company uses the LIFO inventory
method for external reporting and for income tax purposes but
maintains its internal records using FIFO. The following
disclosure note was included in a recent annual report:
5. Inventories ($in millions)
February 27, 2009
February 29, 2008
Raw Materials
$61.3
$67.5
Work-in-Process
15.9
20.9
Finished Goods
79.9
87.9
157.1
3. 176.3
LIFO reserve
(27.2)
(29.6)
$129.9
$146.7
The company’s income statement reported cost of goods sold of
$2,236.7 million for the fiscal year ended February 27, 2009.
Required:
1. Steelcase adjusts the LIFO reserve at the end of its fiscal
year. Prepare the February 27, 2009 adjusting entry to make the
cost of goods sold adjustment.
2. If Steelcase had used FIFO to value its inventories, what
would cost of goods sold have been for the 2009 fiscal year?
P 8-5
Ferris Company began 2011 with 6,00o units of its principal
product. The cost of each unit is $8. Merchandise transactions
for the month of January 2011 are as follows:
Purchases
Date of Purchase
Units
Unit Cost*
Total Cost
Jan. 10
5. 9,000
8,000 units were on hand at the end of the month.
Required:
Calculate January’s ending inventory and cost of goods sold for
the month using each of the following alternatives:
1. FIFO, periodic system
2. LIFO, periodic system
3. LIFO, perpetual system
4. Average cost, periodic system
5. Average cost, perpetual system
E9-19
On January 1, 2011, the Brunswick Hat Company adopted the
dollar-value LIFO retail method. The following data are
available for 2011:
Cost
Retail
Beginning inventory
$71,280
$132,000
Net purchases
112,500
255,000
Net markups
6,000
Net markdowns
11,000
Net sales
6. 232,000
Retail Price Index, 12/31/11
1.04
Required:
Calculate the estimated ending inventory and cost of goods sold
for 2011.
E9-21
Lance-Heffner Specialty Shoppes decided to use the dollar-
value LIFO retail method to value its inventory. Accounting
records provide the following information:
Cost
Retail
Merchandise Inventory, January 1, 2011
$160,000
$250,000
Net Purchases
350,200
510,000
7. Net Markups
60,000
7,000
Net Markdowns
2,000
Net Sales
380,000
Pertinent retail price indexes are as follows:
January 1, 2011 1.00
December 31, 2011 1.10
Required:
Determine ending inventory and cost of goods sold.
P9-1
Decker Company has five products in its inventory. Information
about the December 31, 2011 inventory follows:
Product
Quantity
9. 40 percent of the selling price.
Required:
1. Determine the balance sheet inventory carrying value at
December 31, 2011, assuming the LCM rule is applied to
individual products.
2. Determine the balance sheet inventory carrying value at
December 31, 2011 assuming the LCM rule is applied to the
entire inventory. Also, assuming that Decker recognizes an
inventory write-down as a separate income statement item,
determine the amount of the loss.
Submit the exercise using the same basic information except
change the problems with the new numbers provided.
EX 8-13
Unit Purchases
8000
Unit Purchases
7000
15. Problem 9-6 (Changed from problem 9-1)
Cost
Retail
Beginning inventory
50,000
75,000
Plus: Purchases
100000
135000
Freight-in
6000
Purchase returns
2600
3300
Net markups
16. 2500
Net markdowns
1000
Normal spoilage
6000
Net sales
160000
Exercise 8-13
NOTE: Inventory ending balance may change based upon
changed purchases.
Cost of goods available for sale:
Beginning inventory
Purchases:
17. $
Cost of goods available
$
First-in, first-out (FIFO)
Cost of goods available for sale
Less: Ending inventory (determined below)
Cost of goods sold
Cost of ending inventory:
Date of
purchase
Units
Unit cost
Total cost
August 18
Last-in, first-out (LIFO)
Cost of goods available for sale
18. Less: Ending inventory (determined below)
Cost of goods soldCost of ending inventory:
Date of
purchase
Units
Unit cost
Total cost
Beg. Inv.
August 8
Total
$
Exercise 8-13 (concluded)
Average cost
Cost of goods available for sale
$
Less: Ending inventory (determined below)
Cost of goods sold*Cost of ending inventory:
$
19. Weighted-average unit cost =
=
units
Exercise 8-14
NOTE: Inventory ending balance may change based upon
changed purchases.
See example of perpetual inventory below:
FIFO
DatePurchasedCostSoldBalance UnitsCostTotal Cost
Beg Bal20006.10$ 20006.10$
12,200.00$
8-Aug100005.50$ 20006.10$ 12,200.00$
100005.50$ 55,000.00$
1200067,200.00$
14-Aug800040005.50$ 22,000.00$
40005.50$ 22,000.00$
18-Aug60005.00$ 60005.00$ 30,000.00$
1000052,000.00$
25-Aug700030005.00$ 15,000.00$
First-in, first-out (FIFO)
Cost of goods sold:Date of
Cost of
sale
Units sold
20. Units Sold
Total Cost
Aug. 14
Aug. 25
Total
$
Ending inventory = units x $ =
Last-in, first-out (LIFO)
Date
Purchased
Sold
Balance
22. Ending
inventory
Total cost of goods sold
=
Exercise 8-14 (concluded)
(Note: the perpetual inventory LIFO results in this exercise are
the same as periodic LIFO results, due to the timing of sales and
purchases. The same LIFO layers are on hand at the end of the
period under each method. This is unusual. LIFO perpetual and
LIFO periodic normally produce different results for ending
inventory and cost of goods sold.)
Average cost
Date
Purchased
Sold
Balance
Beginning inventory
24. Ending
inventory
Total cost of goods sold
= $
Problem 8-5
NOTE: Inventory ending balance may change based upon
changed purchases.
Cost of goods available for sale for periodic system:
Beginning inventory
$
Purchases:
Cost of goods available (17,000 units)
$
1. FIFO, periodic system
Cost of goods available for sale
$
Less: Ending inventory (determined below)
Cost of goods sold$
Cost of ending inventory:
Date of
25. purchase
Units
Unit cost
Total cost
Jan. 10
Jan. 18
Totals
$
Problem 8-5 (continued)
2. LIFO, periodic system
Cost of goods available for sale
$
Less: Ending inventory (determined below)
Cost of goods sold$
Cost of ending inventory:
Date of
26. purchase
Units
Unit cost
Total cost
Beg. Inv.
Jan. 10
Totals
$
Problem 8-5 (continued)
3. LIFO, perpetual system
Date
Purchased
Sold
Balance
Beginning inventory
28. Ending
inventory
Total cost of goods sold
=
4. Average cost, periodic system
Cost of goods available for sale (17,000 units)
$
Less: Ending inventory (below)
Cost of goods sold
Cost of ending inventory:
$
Weighted-average unit cost = = $
units
29. Problem 8-5 (concluded)
5. Average cost, perpetual system
Date
Purchased
Sold
Balance
Beginning inventory
January 5
January 10
Available
31. Exercise 9-8
Beginning inventory (from records)
Plus: Net purchases (from records)
Cost of goods available for sale
Less: Cost of goods sold:
Net sales
Less: Estimated gross profit of 25%
Estimated cost of goods sold
32. Estimated cost of inventory destroyed
$
Exercise 9-13
Cost
Retail
Beginning inventory
Plus:
Net purchases
Net markups
Less:
Net markdowns
Goods available for sale
Cost-to-retail percentage:
=
33. Less:
Net sales
Estimated ending inventory at retail
Estimated ending inventory at cost (66% x $50,000)
Estimated cost of goods sold
Problem 9-6
Requirement 1
Cost
Retail
Beginning inventory
Plus:
Purchases