*PROBLEM 6-8A (Continued)
(b)
Gross profit:
LIFO
FIFO
Moving-
Average
Sales
$15,690
$15,690
$15,690
– Cost of goods sold
8,200
7,825
7,927
*PROBLEM 6-9A
(a) (1) FIFO
Cost of
Date Purchases Goods Sold Balance
July 1 (7 @ $ 62) $434 (7 @ $ 62) $434
6 (5 @ $62) $310 (2 @ $ 62) $124
11 (3 @ $ 66) $198 (2 @ $ 62)
(2) MOVING-AVERAGE
Cost of
Date Purchases Goods Sold Balance
July 1 (7 @ $ 62) $434 (7 @ $62) $434
6 (5 @ $62) $310 (2 @ $62) $124
(3) LIFO
Cost of
Date Purchases Goods Sold Balance
July 1 (7 @ $ 62) $434 (7 @ $ 62) $434
6 (5 @ $ 62) $310 (2 @ $ 62) $124
11 (3 @ $ 66) $198 (2 @ $ 62)
(b) The highest ending inventory is $213 under the FIFO method.
LO 4 BT: AP Difficulty: Hard TOT: 30 min. AACSB: Analytic AICPA FC: Measurement and Reporting
ACCOUNTING CYCLE REVIEW SOLUTION
(a)
Dec. 3
Inventory (4,000 X $0.72) ……………………….
Accounts Payable ………………………….
2,880
2,880
5
Accounts Receivable (4,400 X $0.90) ……..
Sales Revenue ……………………………….
3,960
3,960
Inventory ………………………………………………
Cost of Goods Sold ………………………..
144
144
17
Inventory (2,200 X $0.80) ……………………….
Cash ……………………………………………..
1,760
1,760
Inventory ……………………………………….
1,440
Income Tax Expense …………………………….
Income Taxes Payable ……………………
215
215
ACCOUNTING CYCLE REVIEW SOLUTION (Continued)
(b) General Ledger
Cash
Bal. 4,800
1,760
Bal. 3,040
Accounts Receivable
Bal. 9,580
Bal. 17,000
Bal. 3,900
180
Inventory
Bal. 1,800
2,880
144
1,760
2,808
1,440
Bal. 2,336
Bal. 21,000
Bal. 4,104
Accumulated
Depreciation—Equipment
Bal. 1,500
200
Bal. 1,700
Bal. 3,000
Bal. 5,880
Bal. 400
Sales Returns & Allowances
180
Bal. 180
Salaries and Wages Payable
400
Bal. 400
Income Taxes Payable
215
Common Stock
Bal. 10,000
Retained Earnings
Sales Revenue
3,960
1,900
Bal. 5,860
Cost of Goods Sold
2,808
144
Depreciation Expense
200
Bal. 200
Salaries and Wages Expense
400
Income Tax Expense
215
Bal. 215
ACCOUNTING CYCLE REVIEW SOLUTION (Continued)
(c) WAYLON COMPANY
Adjusted Trial Balance
December 31, 2017
DR.
CR.
Cash ………………………………………………………
$ 3,040
Accounts Receivable ………………………………
9,580
Inventory ………………………………………………..
2,336
Equipment ……………………………………………..
21,000
Accumulated Depreciation—Equipment …..
$ 1,700
Accounts Payable …………………………………..
5,880
Salaries and Wages Payable ……………………
Income Taxes Payable …………………………….
Common Stock ……………………………………….
10,000
Retained Earnings ………………………………….
17,000
Sales Revenue ………………………………………..
5,860
Sales Returns & Allowances ……………………
180
Cost of Goods Sold ………………………………..
4,104
Salaries and Wages Expense ………………….
Depreciation Expense …………………………….
Income Tax Expense ………………………………
215
$41,055
$41,055
(d) WAYLON COMPANY
Income Statement
For the Month Ending December 31, 2017
Sales revenue ………………………………………
$5,860
Less: Sales returns and allowances …….
180
Net sales ……………………………………………..
$5,680
Cost of goods sold ………………………………
4,104
Gross profit …………………………………………
Operating expenses
Salaries and wages expense ………….
Depreciation expense ……………………
600
Income before income tax …………………….
Income tax expense ……………………………..
215
Net income …………………………………………..
$ 761
ACCOUNTING CYCLE REVIEW SOLUTION (Continued)
WAYLON COMPANY
Balance Sheet
December 31, 2017
Assets
Current assets
Cash ………………………………………………..
$ 3,040
Accounts receivable …………………………
Inventory ………………………………………….
2,336
Total current assets …………………….
Property, plant, and equipment
Equipment ……………………………………….
21,000
Total assets …………………………………………….
Less: Accumulated depreciation—
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable …………………………….
$ 5,880
Salaries and wages payable ……………..
400
Income taxes payable ……………………….
Total current liabilities …………………
$ 6,495
Common stock …………………………………
10,000
Retained earnings ($17,000 + $761) …..
17,761
Total stockholders’ equity ……………
27,761
ACCOUNTING CYCLE REVIEW SOLUTION (Continued)
(e) FIFO Method
Units
Unit Cost
Cost of Goods
Available for Sales
Beg. Inventory
3,000
$0.60
$1,800
Dec. 3 purchase
4,000
$0.72
2,880
Dec. 17 purchase
2,200
$0.80
9,200
$6,440
Dec. 17
2,200 X $0.80 = $1,760
Cost of goods available for sale
$6,440
Dec. 3
Less: Ending inventory
Cost of goods sold
$4,104
(f) LIFO Method
Ending Inventory
Cost of Goods Sold
Dec. 1
3,000 X $0.60 = $1,800
Cost of goods available for sale
$6,440
Less: Ending inventory
Cost of goods sold
$4,640
CT 6-1 FINANCIAL REPORTING PROBLEM
(Note: All dollar amounts are in millions)
(a) Inventories were $2,111 at September 27, 2014 and $1,764 at September
28, 2013.
CT 6-2 COMPARATIVE ANALYSIS PROBLEM
(a) Columbia Sportswear VF Corporation
1. Inventory turnover
$1, 145,639
($384,650 + $329,228) ÷ 2
$6,288,190
($1,482,804 + $1,399,062) ÷ 2
(b) Generally, companies that are able to keep their inventory at lower
levels and higher turnovers and still satisfy customer needs are the
most successful. Both companies have low inventory turnovers. As a
CT 6-3 COMPARATIVE ANALYSIS PROBLEM
(a) Amazon.com Wal-Mart
1. Inventory turnover
$62,752
($7,411 + $8,299) ÷ 2
$365,086__ __
($45,141 + $44,858)/2
CT 6-4 INTERPRETING FINANCIAL STATEMENTS
(a) Finished goods are manufactured inventory items that are ready for
resale. Work in process is inventory that has been put into production
but is not complete. Raw materials are the basic materials that will be
used in production.
(c)
2017
2016
Inventory turnover:
$809,956
($216,671 + $203,873)/2
$780,771
($182,618 + $216,671)/2
(d) The LIFO reserve, $86,025, represents 42% of total inventory
($86,025/$203,873 = .42).
Ending inventory using LIFO ………………… $203,873
CT 6-4 (Continued)
(e) Current ratio:
$561,395 = 1.63 : 1
$343,405
Current assets using LIFO $561,395
$343,405