Problem 9–10
Requirement 1
Cost
Retail
Beginning inventory
$ 27,500
$ 45,000
Plus: Purchases
282,000
490,000
Freight-in
Less: Purchase returns
Purchase discounts
Plus: Net markups
550,000
Less: Net markdowns
_______
Goods available for sale
540,000
Less:
Estimated ending inventory at retail
$ 50,000
Estimated ending inventory at cost (59% x $50,000)
9–62 Intermediate Accounting, 8/e
Problem 9–10 (continued)
Requirement 2
Cost
Retail
Beginning inventory
$ 27,500
$ 45,000
Plus: Purchases
282,000
490,000
Freight-in
26,500
Less: Purchase returns
(6,500)
(10,000)
Plus: Net markups
25,000
Less: Net markdowns
Goods available for sale (excluding beg. inventory)
495,000
Goods available for sale (including beg. inventory)
$324,500
540,000
Less:
Employee discounts
Estimated ending inventory at cost:
Problem 9–10 (concluded)
Requirement 3
2015
Step 1 Step 2 Step 3
Ending Ending Inventory Inventory
Inventory Inventory Layers Layers
at Year-End at Base Year at Base Year Converted to
Retail Prices Retail Prices Retail Prices Cost
2016
9–64 Intermediate Accounting, 8/e
Problem 9–11
Requirement 1
Employee discounts must be deducted in the retail column.
2016:
$14,000
= $20,000 – 14,000 = $6,000 = Employee discounts
.70
Cost
Retail
Beginning inventory
$ 90,000
$150,000
Plus: Purchases
478,000
730,000
Freight-in
Less: Purchase returns
(2,500)
(3,500)
Plus: Net markups
Less: Net markdowns
Goods available for sale (excluding beg. inventory)
482,460
731,000
Goods available for sale (including beg. inventory)
572,460
881,000
Less:
Normal spoilage
(5,000)
Estimated ending inventory at retail
$206,000
Estimated ending inventory at cost (below)
123,990
Estimated cost of goods sold
Problem 9–11 (continued)
9–66 Intermediate Accounting, 8/e
Problem 9–11 (continued)
Employees must be deducted in the retail column.
2017:
$17,500
= $25,000 – 17,500 = $7,500 = Employee discounts
.70
Cost
Retail
Beginning inventory
$123,990
$206,000
Freight-in
Less: Purchase returns
Plus: Net markups
Less: Net markdowns
Goods available for sale (including beg. inventory)
$90,000
Base layer cost-to-retail percentage: = 60%
$150,000
Employee discounts
Estimated ending inventory at retail
$254,400
Estimated cost of goods sold
$487,968
Problem 9–11 (continued)
9–68 Intermediate Accounting, 8/e
Problem 9–11 (continued)
Requirement 2
Employee discounts must be deducted in the retail column.
2016:
$14,000
= $20,000 – 14,000 = $6,000 = Employee discounts
.70
Cost
Retail
Beginning inventory
$ 90,000
$150,000
Plus: Purchases
Freight-in
Less: Purchase returns
Plus: Net markups
Less: Net markdowns
Goods available for sale
Less:
Normal spoilage
Estimated ending inventory at retail
$206,000
Estimated ending inventory at cost (64.98% x $206,000)
Estimated cost of goods sold
$438,601
$572,460
Problem 9–11 (concluded)
Requirement 3
Employee discounts must be deducted in the retail column.
2016:
Cost
Retail
Beginning inventory
$ 90,000
$150,000
Plus: Purchases
478,000
730,000
Freight–in
Plus: Net markups
572,460
885,000
$572,460
Cost-to-retail percentage: = 64.68%
$885,000
Less: Markdowns
(4,000)
Goods available for sale
881,000
Normal spoilage
Estimated ending inventory at retail
$206,000
Estimated cost of goods sold
$439,219
9–70 Intermediate Accounting, 8/e
Problem 9–12
Requirement 1
Retained earnings ………………………………………………………… 20,000
Inventory ($150,000 – 130,000) …………………………………. 20,000
Requirement 2
FIFO method cost of goods sold:
Cost of goods available for sale $530,000
Less ending inventory:
Average cost method cost of goods sold:
Beginning inventory (5,000 units) $130,000
Cost of ending inventory:
$510,000
Weighted average unit cost = = $34
Problem 9–13
Requirement 1
Analysis: U = Understated
O = Overstated
2014 2015
Beginning inventory Beginning inventory U-6,000
Requirement 2
Retained earnings ………………………………………………….. 12,000
Requirement 3
The financial statements that were incorrect as a result of both errors (effect of
one error in 2014 and effect of three errors in 2015) would be retrospectively restated
9–72 Intermediate Accounting, 8/e
Problem 9–14
Requirement 1
December 31, 2016, inventory, based on a physical count $450,000
Analysis: U = Understated
O = Overstated
2016
Beginning inventory
Plus: Net purchases U – 130,000 ($50,000 + 80,000)
Requirement 2
Retained earnings …………………………………………………… 30,000
Problem 9–15
Requirement 1
Accounts Accounts Sales
Inventory Purchases payable receivable revenue
Unadjusted balance $326,000 $620,000 $210,000 $225,000 $840,000
Item:
1. (32,000)
2. (27,000) (27,000)
Requirement 2
Beginning inventory ($352,000 + 62,000) $414,000
Requirement 3
The 2015 financial statements that were incorrect as a result of the error would be
retrospectively restated to report the correct inventory amounts, cost of goods sold,
9–74 Intermediate Accounting, 8/e
Problem 9–16
Requirement 1
a. $10.50
If market price is equal to or greater than the contract price, the purchase is
recorded at cost.
If market price is less than the contract price, the purchase is recorded at the
market price.
Requirement 2
a. $12.50
December 31, 2016
Estimated loss on purchase commitment