Chapter 9: Inventories: Additional Valuation Issues

Question:What factors might call for inventory valuation at sales prices (net realizable value or market price)?

Dover Company began operations in 2017 and determined its ending inventory at cost and at LCNRV at December 31, 2017, and December 31, 2018. This information is presented below. Cost Net Realizable Value 12/31/17 $346,000$322,000 12/31/18 410,000 390,000 Instructions (a) Prepare the journal entries required at December 31, 2017, and December 31, 2018, assuming inventory is recorded at LCNRV and a perpetual inventory system using the cost-of-goods-sold method. (b) Prepare journal entries required at December 31, 2017, and December 31, 2018, assuming inventory is recorded at LCNRV and a perpetual system using the loss method. (c) Which of the two methods above provides the higher net income in each year?

Presented below is information related to Knight Enterprises. Jan. 31 Feb. 28 Mar. 31 Apr. 30 Inventory at cost $15,000$15,100 $17,000$14,000 Inventory at LCNRV 14,500 12,600 15,600 13,300 Purchases for the month 17,000 24,000 26,500 Sales for the month 29,000 35,000 40,000 Instructions (a) From the information, prepare (as far as the data permit) monthly income statements in columnar form for February, March, and April. The inventory is to be shown in the statement at cost; the gain or loss due to market fluctuations is to be shown separately (using a valuation account). (b) Prepare the journal entry required to establish the valuation account at January 31 and entries to adjust it monthly thereafter. E9-6 (L01) (LCNR

Referring to the inventory data for Sedato Company in E9-3, assume that Sedato follows the practice of pricing its inventory at the lower-of-cost-or-market, on an individual-item basis. Item No. Quantity Cost per Unit Cost to Replace Estimated Selling Price Cost of Completion and Disposal Normal Profi t 1320 1,200 $3.20$3.00 $4.50$0.35 $1.25 1333 900 2.70 2.30 3.50 0.50 0.50 1426 800 4.50 3.70 5.00 0.40 1.00 1437 1,000 3.60 3.10 3.20 0.25 0.90 1510 700 2.25 2.00 3.25 0.80 0.60 1522 500 3.00 2.70 3.80 0.40 0.50 1573 3,000 1.80 1.60 2.50 0.75 0.50 1626 1,000 4.70 5.20 6.00 0.50 1.00 Instructions From the information above, determine the amount of Sedato Company inventory

Question:Refer to the data in IFRS9-8 for Keyser’s Fleece Inc. Prepare the journal entries for (a) the wool harvested in the first six months of 2017, and (b) the wool harvested that is sold for $10,500 in July 2017.

Presented below is information related to Waveland Inc. Cost Retail Inventory, 12/31/17 $250,000$ 390,000 Purchases 914,500 1,460,000 Purchase returns 60,000 80,000 Purchase discounts 18,000 — Gross sales revenue (after employee discounts) — 1,410,000 Sales returns — 97,500 Markups — 120,000 Markup cancellations — 40,000 Markdowns — 45,000 Markdown cancellations — 20,000 Freight-in 42,000 — Employee discounts granted — 8,000 Loss from breakage (normal) — 4,500 486 Chapter 9 Inventories: Additional Valuation Issues Instructions Assuming that Waveland Inc. uses the conventional retail inventory method, compute the cost of its ending inventory at December 31, 2018.

Question:Under what circumstances is relative sales value an appropriate basis for determining the price assigned to inventory?

Boyne Inc. had beginning inventory of $12,000atcostand$20,000 at retail. Net purchases were $120,000atcostand$170,000 at retail. Net markups were $10,000,netmarkdownswere$7,000, and sales revenue was $147,000. Compute ending inventory at cost using the conventional retail method

In its 2015 annual report, Gap Inc. reported inventory of $1,889milliononJanuary31,2015,and$1,928 million on February 1, 2014, cost of goods sold of $10,146millionfor2015,andnetsalesof$16,435 million. Compute Gap’s inventory turnover and the average days to sell inventory for the fiscal year 2015

Marvin Gaye Company has been having difficulty obtaining key raw materials for its manufacturing process. The company therefore signed a long-term noncancelable purchase commitment with its largest supplier of this raw material on November 30, 2017, at an agreed price of $400,000.AtDecember31,2017,therawmaterialhaddeclinedinpriceto$365,000. Instructions What entry would you make on December 31, 2017, to recognize these facts?