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Exercise 8–6
Inventory balance before additional transactions $165,000
Add:
2. Goods shipped to Kwok f.o.b. shipping point on Dec. 28 17,000
Exercise 8–7
Inventory balance before additional transactions $210,000
Add:
4. Merchandise on consignment with Joclyn Corp. 15,000
Exercise 8–8
1. Excluded
3. Included
5. Included
7. Included
Exercise 8–9
Requirement 1
Purchase price = 1,000 units x $50 = $50,000
July 15, 2016
July 23, 2016
Requirement 2
August 15, 2016
Requirement 3
Exercise 8–10
Requirement 1
July 15, 2016
July 23, 2016
Requirement 2
August 15, 2016
Requirement 3
8–24 Intermediate Accounting, 8/e
Exercise 8–11
Requirement 1
Purchases: $500 x 70% = $350 per unit.
100 units x $350 = $35,000
November 17, 2016
November 26, 2016
Accounts payable ........................................................... 35,000
Requirement 2
December 15, 2016
Exercise 8–11 (concluded)
Requirement 3
Requirement 1:
November 17, 2016
November 26, 2016
Requirement 2:
December 15, 2016
Exercise 8–12
The FASB Accounting Standards Codification® represents the single source
of authoritative U.S. generally accepted accounting principles. The specific
citation for each of the following items is:
1. Define the meaning of cost as it applies to the initial measurement of
inventory.
FASB ASC 330–10–30–1: “Inventory–Overall–Initial Measurement.”
The primary basis of accounting for inventories is cost, which has been
2. Indicate the circumstances when it is appropriate to initially measure
agricultural inventory at fair value.
FASB ASC 905–330–30–1: “Agriculture–Inventory–Initial
Measurement.”
Exceptional cases exist in which it is not practicable to determine an
appropriate cost basis for products. A market basis is acceptable if the
products meet all of the following criteria:
Exercise 8–12 (concluded)
3. What is a major objective of accounting for inventory?
4. Are abnormal freight charges included in the cost of inventory?
8–28 Intermediate Accounting, 8/e
Exercise 8–13
Cost of goods available for sale:
Beginning inventory (2,000 x $6.10) $12,200
Purchases:
First-in, first-out (FIFO)
Cost of goods available for sale (18,000 units) $97,200
Cost of ending inventory:
Last-in, first-out (LIFO)
Cost of goods available for sale (18,000 units) $97,200
Cost of ending inventory:
Date of
purchase Units Unit cost Total cost
Exercise 8–13 (concluded)
Average cost
Cost of goods available for sale (18,000 units) $97,200
Less: Ending inventory (determined below) (16,200)
Cost of goods sold $81,000 *
8–30 Intermediate Accounting, 8/e
Exercise 8–14
First-in, first-out (FIFO)
Cost of goods sold:
Date of Cost of
Sale Units Sold Units Sold Total Cost
Aug. 14 2,000 (from Beg. Inv.) $6.10 $12,200
Last-in, first-out (LIFO)
Date
Purchased
Sold
Balance
Beginning
inventory
2,000 @ $6.10 = $12,200
2,000 @ $6.10 $12,200
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
2,000 @ $6.10 = $12,200
2,000 @ $6.10 $12,200
8–32 Intermediate Accounting, 8/e
Exercise 8–15
Requirement 1
LIFO will result in the highest cost of goods sold figure because both the cost of
merchandise and the quantity of merchandise rose during the period. FIFO will result
in the highest ending inventory balance for the same reasons.
Requirement 2
Cost of goods available for sale:
Beginning inventory (600 x $80) $ 48,000
Purchases:
First-in, first-out (FIFO)
Cost of goods available for sale (2,400 units) $223,000
Less: Ending inventory (below) (80,000)
Cost of goods sold $143,000
Cost of ending inventory:
Last-in, first-out (LIFO)
Cost of goods available for sale (2,400 units) $223,000
Cost of ending inventory:
Date of
purchase Units Unit cost Total cost
Exercise 8–16
Requirement 1
Cost of goods available for sale:
Beginning inventory (5,000 x $10.00) $ 50,000
Purchases:
Cost of goods available for sale (16,000 units) $167,200
Cost of ending inventory:
8–34 Intermediate Accounting, 8/e
Exercise 8–16 (concluded)
Requirement 2
Date
Purchased
Sold
Balance
Beginning
inventory
5,000 @ $10.00 = $50,000
5,000 @ $10.00 $50,000
September 10
4,000 @ $10.15 = $40,600
4,000 @ $10.15 $40,600
September 25
8,000 @ $10.75 = $86,000
Exercise 8–17
Requirement 1
FIFO cost of goods sold:
Requirement 2
LIFO cost of goods sold:
Calculations to determine cost per unit of year 2016 purchases:
Cost of goods sold
= Weighted-average cost per unit
Number of units sold
Cost of goods available for sale:
Beginning inventory (10,000 x $5.00) $ 50,000
Purchases (30,000 x $6.00) 180,000
Cost of goods available (40,000 units) $230,000
Exercise 8–18
Requirement 1
January 31, 2014 ($ in thousands)
Requirement 2
Exercise 8–19
Requirement 1
Cost of goods sold:
50,000 units x $8.50 = $425,000
Requirement 2
When inventory quantity declines during a reporting period, liquidation of LIFO
inventory layers carried at different costs prevailing in prior year’s results in
8–38 Intermediate Accounting, 8/e
Exercise 8–20
Units liquidated 10,000
Units liquidated multiplied by the difference between
their current cost and acquisition cost:
8,000 x ($12 – 9) = $24,000
Exercise 8–21
Requirement 2
Requirement 3
When a company using LIFO liquidates a substantial portion of its LIFO
inventory and as a result includes a material amount of income in its income statement
Exercise 8–22
($ in millions)
HOME DEPOT LOWE’S
Gross profit ratio = 27,390 = 34.8% 18,476 = 34.6%
78,812 53,417
Exercise 8–23
Ending
Ending Inventory Inventory Layers Inventory Layers Inventory
Date at Base Year Cost at Base Year Cost Converted to Cost DVL Cost
1/1/16 $660,000
= $660,000 $660,000 (base) $660,000 x 1.00 = $660,000 $660,000
1.00
8–40 Intermediate Accounting, 8/e
Exercise 8–24
Ending
Ending Inventory Inventory Layers Inventory Layers Inventory
Date at Base Year Cost at Base Year Cost Converted to Cost DVL Cost
12/31/16 $200,000
= $200,000 $200,000 (base) $200,000 x 1.00 = $200,000 $200,000
1.00
