ACC305 WEEK 4 E8-13, E8-14, E8-18, P8-5, E9-19, E9-21, and P9-1 Decker Company

ASHFORD ACC305 WEEK 4 E8-13, E8-14, E8-18, P8-5, E9-19, E9-21, and P9-1

ACC305 Intermediate Accounting I Textbook: Spiceland, J. D., Sepe, J. F. & Nelson, M.W. (2011). Intermediate Accounting (6th ed.). New York, N.Y.: McGraw-Hill Irwin. ISBN: 9780077500375   

Week Four Exercise E8-13, E8-14, E8-18, P8-5, E9-19, E9-21, and P9-1. E

ASHFORD ACC305 WEEK 4 E8-13, E8-14, E8-18, P8-5, E9-19, E9-21, and P9-1

8-13 Inventory cost flow methods; periodic system ● LO1 LO4 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. 8 Purchased 10,000 units for $5.50 each. 14 Sold 8,000 units for $12.00 each. 18 Purchased 6,000 units for $5.00 each. 25 Sold 7,000 units for $11.00 each.

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

E 8-14 Inventory cost flow methods; perpetual system ● LO1 LO4 [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. 8 Purchased 10,000 units for $5.50 each. 14 Sold 8,000 units for $12.00 each. 18 Purchased 6,000 units for $5.00 each. 25 Sold 7,000 units for $11.00 each. 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  

E 8-18 Supplemental LIFO disclosures; LIFO reserve; Steelcase Real World Financials

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 Various inventory costing methods

Ferris Company began 2011 with 6,000 units of its principal product. The cost of each unit is $8. Merchandise transactions for the month of January 2011 are as follows:

		Parchases
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

 (K)
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

P9-16 Purchase commitments. In November 2011, the Brunswick Company signed two purchase commitments. The first commitment

In November 2011, the Brunswick Company signed two purchase commitments. The first commitment requires Brunswick to purchase 10,000 units of inventory at $10 per unit by December 15, 2011. The second commitment requires the company to purchase 20,000 units of inventory at $11 per unit by March 15, 2012. Brunswick's fiscal year-end is December 31. The company uses a periodic inventory system. Both contracts were exercised on their expiration date.

Required:

1. Prepare the journal entry to record the December 15 purchase for cash assuming the following alternative unit market prices on that date:
a. $10.50
b. $ 9.50

2. Prepare any necessary adjusting entry at December 31, 2011, for the second purchase commitment assuming the following alternative unit market prices on that date:

a. $12.50
b. $10.30

3. Assuming that the unit market price on December 31 was $10.30, prepare the journal entry to record the purchase on March 15, 2010, assuming the following alternative unit market prices on that date:

a. $11.50
b. $10.00

E9-21 Dollar-value LIFO retail

Lance-Hefner 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          $160,000         $250,000
Net purchases                                      350,200           510,000
Net markups                                                                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. Unit Unit Unit Replacement Selling Product/ Quantity/ Unit Cost /unit replacement Cost/ unit selling Price_____ A /1,000 /$10/ $12 $16 B /800 /15/ 11/ 18 C/ 600 /3/ 2/ 8 D/ 200/ 7 /4/ 6 E /600 /14 /12 /13 The selling cost for each product consists of a 15 percent sales commission. The normal profit percentage for each product is 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.

Please see the attachment for excel solution.

TUTORIAL PREVIEW

					Inventory
Requirement 1
		(1)	(2)	(3)	(4)	(5)
			Ceiling	Floor
Product	Units	RC	NRV	NRV-NP	Designated market value [Middle value of (1), (2), &(3)	Cost	Inventory value [Lower of 4) $(5)
A	1,000	$       12,000	$       13,600	$         7,200	$       12,000	$       10,000	$       10,000
B	800	8,800	12,240	6,480	8,800	12,000	8,800
C	600	1,200	4,080	2,160	2,160	1,800	1,800

File name: P9-1-Decker.xls  File type: XLS

File name: ACC305-WEEK-4.doc File type: DOC PRICE:$30

 

 

ACC291 Week 2 E8-3 BE9-13 Do it!9-4 E9-9 E9-10 P9-5A

ACC291 Week 2 E8-3 BE9-13 Do it!9-4 E9-9 E9-10 P9-5A

Exercise E8-3 (in Class)

Exercise BE9-13

Exercise Do It! 9-4

Exercise E9-9

Exercise E9-10

Problem P9-5A

 

E8-3 The ledger of Hixson Company at the end of the current year shows Accounts Receivable $120,000, Sales $840,000, and Sales Returns and Allowances $30,000.

Instructions
(a) If Hixson uses the direct write-off method to account for uncollectible accounts, journalize the adjusting entry at December 31, assuming Hixson determines that Fell’s $1,400 balance is uncollectible.

(b) If Allowance for Doubtful Accounts has a credit balance of $2,100 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be (1) 1% of net sales, and (2) 10% of accounts receivable.

(c) If Allowance for Doubtful Accounts has a debit balance of $200 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be (1) 0.75% of net sales and (2) 6% of accounts receivable.

BE9-13 Information related to plant assets, natural resources, and intangibles at the end of 2011 for Spain Company is as follows: buildings $1,100,000; accumulated depreciation—buildings $650,000; goodwill $410,000; coal mine $500,000; accumulated depletion—coal mine $108,000.

Prepare a partial balance sheet of Spain Company for these items.

 

Do it! 9-4 Match the statement with the term most directly associated with it.

(a) Goodwill                                        (d) Amortization

(b) Intangible assets                            (e) Franchise

(c) Research and development costs

1. ______ Rights, privileges, and competitive advantages that result from the ownership of long lived assets that do not possess physical substance.

2. ______ The allocation of the cost of an intangible asset to expense in a rational and systematic manner.

3. ______ A right to sell certain products or services, or use certain trademarks or trade names within a designated geographic area.

4. ______ Costs incurred by a company that often lead to patents or new products. These costs must be expensed as incurred.

5. ______ The excess of the cost of a company over the fair market value of the net assets acquired.

E9-9 Presented below are selected transactions at Ingles Company for 2011.

Jan. 1 Retired a piece of machinery that was purchased on January 1, 2001.The machine cost $62,000 on that date. It had a useful life of 10 years with no salvage value.

June 30 Sold a computer that was purchased on January 1, 2008.The computer cost $40,000. It had a useful life of 5 years with no salvage value.The computer was sold for $14,000.

Dec. 31 Discarded a delivery truck that was purchased on January 1, 2007. The truck cost $39,000. It was depreciated based on a 6-year useful life with a $3,000 salvage value.

Instructions

Journalize all entries required on the above dates, including entries to update depreciation, where applicable, on assets disposed of. Ingles Company uses straight-line depreciation. (Assume depreciation is up to date as of December 31, 2010.)

E9-10 Beka Company owns equipment that cost $50,000 when purchased on January 1, 2008.

It has been depreciated using the straight-line method based on estimated salvage value of $5,000 and an estimated useful life of 5 years.

Instructions

Prepare Beka Company’s journal entries to record the sale of the equipment in these four independent situations.

(a) Sold for $28,000 on January 1, 2011.

(b) Sold for $28,000 on May 1, 2011.

(c) Sold for $11,000 on January 1, 2011.

(d) Sold for $11,000 on October 1, 2011.

P9-5A At December 31, 2011, Jimenez Company reported the following as plant assets.
and so on ...

At December 31, 2011, Jimenez Company reported the following as plant assets.

Land                                                                                                                $ 4,000,000

Buildings                                                                     $28,500,000

Less: Accumulated depreciation—buildings                12,100,000                   16,400,000

Equipment                                                                   48,000,000

Less: Accumulated depreciation—equipment              5,000,000                      43,000,000

Total plant assets                                                                                             $63,400,000

During 2012, the following selected cash transactions occurred.

April 1 Purchased land for $2,130,000.

May 1 Sold equipment that cost $780,000 when purchased on January 1, 2008. The equipment was sold for $450,000.

June 1 Sold land purchased on June 1, 2002, for $1,500,000.The land cost $400,000.

July 1 Purchased equipment for $2,000,000.

Dec. 31 Retired equipment that cost $500,000 when purchased on December 31, 2002. No salvage value was received.

Instructions

(a) Journalize the above transactions. The company uses straight-line depreciation for buildings and equipment. The buildings are estimated to have a 50-year life and no salvage value. The equipment is estimated to have a 10-year useful life and no salvage value. Update depreciation on assets disposed of at the time of sale or retirement.

(b) Record adjusting entries for depreciation for 2012. (c) Prepare the plant assets section of Jimenez’s balance sheet at December 31, 2012.

 

 

 

 

 

SOLUTION PREVIEW

Jan. 1	Accumulated Depreciation—Machinery	62,000
	Machinery		62,000
June 30	Depreciation Expense	4,000
	Accumulated Depreciation—
	Computer ($40,000 X 1/5 X 6/12)		4,000

 

File name: ACC291-Week-2-.doc File type: DOC PRICE: $20

ACC291 E8-5 E9-2 E9-7 E9-12 - E8-5 At December 31, 2010, Braddock Company had a balance of $15,000 in the Allowance for Doubtful Accounts.

ACC291 E8-5 E9-2 E9-7 E9-12

E8-5 At December 31, 2010, Braddock Company had a balance of $15,000 in the Allowance for Doubtful Accounts. During 2011, Braddock wrote off accounts totaling $13,000. One of those ccounts ($1,800) was later collected.At December 31, 2011, an aging schedule indicated that the balance in the Allowance for Doubtful Accounts should be $19,000.

Instructions

Prepare journal entries to record the 2011 transactions of Braddock Company.

E9-2 Trudy Company incurred the following costs.

1. Sales tax on factory machinery purchased $ 5,000

2. Painting of and lettering on truck immediately upon purchase 700

3. Installation and testing of factory machinery 2,000

4. Real estate broker’s commission on land purchased 3,500

5. Insurance premium paid for first year’s insurance on new truck 880

6. Cost of landscaping on property purchased 7,200

7. Cost of paving parking lot for new building constructed 17,900

8. Cost of clearing, draining, and filling land 13,300

9. Architect’s fees on self-constructed building 10,000

 

Instructions

Indicate to which account Trudy would debit each of the costs.

Transaction
1. Sales tax on factory machinery purchased $5,000
2. Painting of and lettering on truck immediately upon purchase 700
3. Installation and testing of factory machinery 2,000
4. Real estate broker’s commission on land purchased 3,500
5. Insurance premium paid for first year’s insurance on new truck 880
6. Cost of landscaping on property purchased 7,200
7. Cost of paving parking lot for new building constructed 17,900
8. Cost of clearing, draining, and filling land 13,300
9. Architect’s fees on self-constructed building 10,000

E9-7 Brainiac Company purchased a delivery truck for $30,000 on January 1, 2011.The truck has an expected salvage value of $2,000, and is expected to be driven 100,000 miles over its estimated useful life of 8 years.Actual miles driven were 15,000 in 2011 and 12,000 in 2012.

Instructions
(a) Compute depreciation expense for 2011 and 2012 using (1) the straight-line method, (2) the units-of-activity method, and (3) the double-declining balance method.

(b) Assume that Brainiac uses the straight-line method.

(1) Prepare the journal entry to record 2011 depreciation.
(2) Show how the truck would be reported in the December 31, 2011, balance sheet.

E9-12 The following are selected 2011 transactions of Franco Corporation. Jan. 1 Purchased a small company and recorded goodwill of $150,000. Its useful life is indefinite.

May 1 Purchased for $90,000 a patent with an estimated useful life of 5 years and a legal life of 20 years.

Instructions

Prepare necessary adjusting entries at December 31 to record amortization required by the events above.

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