Chapter 5: Q16DQ (page 259)
Refer to Samsung’s financial statements in Appendix A. Compute its cost of goods available for sale for the year ended December 31, 2015.
The business entity hasKRW142,293,912 million costs of goods available for sale.
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Refer to the information in Problem 5-3A and assume the periodic inventory system is used.
Required
1. Compute the cost of goods available for sale and the number of units available for sale.
The records of Macklin Co. provide the following information for the year ended December 31.
At cost | At Retail | |
January 1, Beginning Inventory | \(90,022 | \)115,610 |
Cost of Goods Purchased | 502,250 | 761,830 |
Sales | 782,300 | |
Sales Return | 3,460 |
Required
1. Use the retail inventory method to estimate the company’s year-end inventory
Samsung Electronics reports the following regarding its accounting for inventories.
Inventories are stated at the lower of cost or net realizable value. Cost is determined using the average cost method, except for materials-in-transit. Inventories are reduced for the estimated losses arising from excess, obsolescence, and the decline in value. This reduction is determined by estimating market value based on future customer demand. The losses on inventory obsolescence are recorded as a part of cost of sales.
1. What cost flow assumption(s) does Samsung apply in assigning costs to its inventories?
What does the full disclosure principle prescribe if a company changes from one acceptable accounting method to another?
Use the data in Exercise 5-3 to prepare comparative income statements for the month of January for Laker Company similar to those shown in Exhibit 5.8 for the four inventory methods. Assume expenses are $1,250 and that the applicable income tax rate is 40%. (Round amounts to cents.)
3. If costs were rising instead of falling, which method would yield the highest net income?
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