General Instructions
1. The following worksheet may be used to complete the exercise/problem.
You may need to refer to your textbook for additional information.
E5-20
Net sales 122,040$
Cost of goods sold:
Beginning inventory 23,400$
Net purchases 74,600$
Inc.
CARPENTERS DEPARTMENT STORE INC.
General Instructions
1. The following worksheet may be used to complete the exercise/problem.
E5-24
Units Unit Cost
Beginning inventory 200 10$
Purchases:
Required
Units Cost Total Cost
200 10$ 2,000$
300 11 3,300
The following information is available concerning the inventory of Carter Inc.:
1. (a) Calculate ending inventory and cost of goods sold using the weighted average method.
Weighted average method:
Cost of goods available for sale and units available:
2. The blue cells are for data entry. Enter text in the T cells, formulas in the F cells, and
dollars or numbers in the $ cells.
FIFO method:
Ending inventory cost: Units Cost Total Cost
150 15$ 2,250$
150 13 1,950
Total: 300 4,200$
LIFO method:
Ending inventory cost: Units Cost Total Cost
200 10$ 2,000$
100 11 1,100
Tax Implications at 30%:
LIFO cost of goods sold 12,500$
FIFO cost of goods sold 11,400
1. (c) Calculate ending inventory and cost of goods sold using the LIFO method.
2. Assume an estimated tax rate of 30%. How much more or less (indicate which) will Carter pay in taxes
by using FIFO instead of LIFO? Explain your answer.
1. (b) Calculate ending inventory and cost of goods sold using the FIFO method.
3. Assume that Carter prepares its financial statements in accordance with IFRS. Which costing method
should it use to pay the least amount of taxes? Explain your answer.
General Instructions
1. The following worksheet may be used to complete the exercise/problem.
You may need to refer to your textbook for additional information.
Stillwater, which uses a perpetual system, sold 1,000 units for $22 each during the year.
Sales occurred on the following dates:
E5-27
Units Unit Cost
Beginning inventory 200 10$
Purchases:
March 5 300 11
June 12 400 12
August 23 250 13
October 2 150 15
Required
Moving average:
Date Units Unit Cost
Total
Unit Cost
Total
Unit Cost Balance
Cost of goods sold
Ending inventory
January 1 200 10.000$ 2,000$
February 12 150 10.000$ 1,500$ 50 10.000 500
NOTE: Figures above reflect slight rounding differences compared to manual solutions due to the precision of Excel formulas.
FIFO:
Date Units Unit Cost
Total
Cost
Units Unit Cost
Total
Cost
Units Unit Cost Balance
January 1 200 10$ 2,000$
February 12 150 10$ 1,500$ 50 10 500
March 5 11$ 3,300$ 50 10
Purchases
Sales
Balance
300
1. (b) Calculate ending inventory and cost of goods sold using the FIFO method.
Units
Units
The following information is available concerning Stillwater Inc.:
1. (a) Calculate ending inventory and cost of goods sold using the moving average method.
Purchases
Sales
Balance
2. The blue cells are for data entry. Enter text in the T cells, formulas in the F cells, and
dollars or numbers in the $ cells.
LIFO:
Date Units Unit Cost
Total
Cost
Units Unit Cost
Total
Cost
Units Unit Cost Balance
150
Cost of goods sold
Ending inventory
400
250
January 1 200 10$ 2,000$
February 12 150 10$ 1,500$ 50 10 500
March 5 11$ 3,300$ 50 10$
300 11 3,800
April 30 200 11$ 2,200$ 50 10$
100 11 1,600
E5-27 – Stillwater Inc.
2. For each of the three methods, compare the results with those of Carter in Exercise 5-25. Which method gives a different answer
depending on whether a company uses a periodic or a perpetual inventory system?
E5-24 – Carter Inc.
Purchases
Sales
Balance
300
1. (c) Calculate ending inventory and cost of goods sold using the LIFO method.
150
Cost of goods sold
Ending inventory
400
250
E/I COGS E/I COGS
Average cost 12,000$ 3,947$ Different
FIFO 11,400 4,200 Same
LIFO 12,500 3,400 Different
The average cost and LIFO methods give different results depending on which inventory system is used.
3. Assume the use of the perpetual system and an estimated tax rate of 30%. How much more or less (indicate which) will
Stillwater pay in taxes by using LIFO instead of FIFO? Explain your answer.
3,600$
11,653$
4,200
11,400
3,100
12,200
LIFO results in a higher cost of goods sold and therefore a lower taxable income and a lower income tax by $240.
General Instructions
1. The following worksheet may be used to complete the exercise/problem.
You may need to refer to your textbook for additional information.
Income Statements 2016 2015
Revenues 35,982$ 26,890$
Cost of goods sold 12,594 9,912
Gross profit 23,388$ 16,978$
Operating expenses 13,488 10,578
Net income 9,900$ 6,400$
Required
Revised income statements: 2016 2015
Revenues 35,982$ 26,890$
Cost of goods sold 12,094 10,412
Gross profit 23,888$ 16,478$
Operating expenses 13,488 10,578
current ratio at the same date after the statements are revised. If Planter applied for a loan in early 2016
2. Compute the current ratio at December 31, 2015, before the statements are revised and compute the
Net income 10,400$ 5,900$
1. Prepare revised income statements and balance sheets for Planter Stores for each of
the two years. Ignore the effect of income taxes.
(Input all amounts in thousands of dollars.)
P5-4A
The following condensed income statements and balance sheets are available for Planter Stores for a two-year period.
(All amounts are stated in thousands of dollars.)
Thus, there is no over- or understatement of retained earnings at December 31, 2014. This illustrates
the nature of a counterbalancing error.
Thus, there is no net over- or understatement of net income for the two-year period
Net income for two years, before revision: 16,300$
two years. The company needs to restate the income statements for each of the two years and restate the balance
sheets at the end of each year.
two years. It is important for comparative purposes that the correct amount of net income be known for each of the
4. Given your answers to parts (2) and (3), does it matter if Planter bothers to restate the
financial statements of the two years to correct the error? Explain your answer.
Even though the error counterbalances over the two-year period, it is still important to restate the statements for the
3. If Planter did not prepare revised statements before releasing the 2016 annual report, what would be
the amount of overstatement or understatement of net income for the two-year period? What would be
the overstatement or understatement of retained earnings at December 31, 2016, if revised statements
were not prepared?
Yes, if the lender required a current ratio of at least 1 to 1, Planter would have been eligible for the loan with the
error. After the correction, however, Planter would not have been eligible for the loan. The company should notify the
bank of the error. Practically, however, the bank might not consider a current ratio of 0.97 to 1 to be materially
different from a current ratio of 1 to 1 and might be willing to grant the loan.
and the lender required a current ratio of at least 1 to 1, would the error have affected the loan?
Explain your answer.
Current ratio:
Cash + Inventory + Other Current Assets
General Instructions
1. The following worksheet may be used to complete the exercise/problem.
You may need to refer to your textbook for additional information.
P5-8A
Required
1. Prepare the appropriate journal entry related to the collection of accounts receivable
and sales during 2014. Assume that all of Walgreen’s sales are on account
Summary journal entries for the year ended August 31, 2014 (in millions):
Cash 2,632
Accounts receivable 2,632
The following information was summarized from the consolidated balance sheets of Walgreen Co. and
Subsidiaries as of August 31, 2014 and 2013 and the consolidated statements of income for the years ended
August 31, 2014 and 2013.
2. The blue cells are for data entry. Enter text in the T cells, formulas in the F cells, percentages in % cells,
and dollars or numbers in the $ cells.
To record sales on account.
Assets = Liabilities + Stockholders’ Equity
= Net Income
Accounts 76,392 Sales 76,392 76,392
Less: Inventory, August 31, 2014
Cost of goods purchased
Cost of goods available for sale
6,852$
statement.
taken by its customers from sales, to arrive at the amount of net sales reported on its income
3. Reconstruct the Cost of Goods Sold section of Walgreen’s 2014 income statement.
Cost of Goods Sold section of 2014 income statement (in millions):
Inventory, August 31, 2013
2. Walgreen Co. sets forth net sales but not gross sales on its income statement. What type(s) of
deduction(s) would be made from gross sales to arrive at the amount of net sales reported?
BALANCE SHEET
INCOME STATEMENT
Revenues
− Expenses
= Net Income
− Expenses
BALANCE SHEET
INCOME STATEMENT