Chapter 8: Q6BE (page 422)
Question:Data for Amsterdam Company are presented in BE8-4. Compute the April 30 inventory and the April cost of goods sold using the LIFO method.
The ending inventory on April 30 was $4,800 and the cost of goods sold amounts to$7,050.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Shania Twain Company was formed on December 1, 2016. The following information is available from Twain’s inventory records for Product BAP.
Units Unit Cost
January 1, 2017 (beginning inventory) 600 $ 8.00
Purchases:
January 5, 2017 1,200 9.00
January 25, 2017 1,300 10.00
February 16, 2017 800 11.00
March 26, 2017 600 12.00
A physical inventory on March 31, 2017, shows 1,600 units on hand.
Instructions
Prepare schedules to compute the ending inventory at March 31, 2017, under each of the following inventory methods.
(a) FIFO (b) LIFO. (c) Weighted-average (round unit costs to two decimal places).
Trout Company uses the LIFO method for financial reporting purposes but FIFO for internal reporting purposes. At January 1, 2017, the LIFO reserve has a credit balance of \(1,300,000. At December 31, 2017, Trout’s internal reports indicatedthat the FIFO inventory balance was \)2,900,000 and for external reporting purposes the LIFO inventory balance was $1,500,000.What is the amount of the LIFO reserve and the LIFO effect related to 2017? What is the journal entry needed to record the LIFOeffect at December 31, 2017?
In an article that appeared in the Wall Street Journal, the phrases “phantom (paper) profits” and “high LIFO profits” through involuntary liquidation were used. Explain the sephrases.
Wilkens Company uses the LIFO method for inventory costing. In an effort to lower net income, company president Mike Wilkens tells the plant accountant to take the unusual step of recommending to the purchasing department a large purchase of inventory at year-end. The price of the item to be purchased has nearly doubled during the year,and the item represents a major portion of inventory value.
Instructions
Answer the following questions.
(a) Identify the major stakeholders. If the plant accountant recommends the purchase, what are the consequences?
(b) If Wilkens Company were using the FIFO method of inventory costing, would Mike Wilkens give the same order? Whyor why not?
The following information relates to the Jimmy Johnson Company.
Ending Inventory Price
Date (End-of-Year Prices) Index
December 31, 2013 $ 70,000 100
December 31, 2014 90,300 105
December 31, 2015 95,120 116
December 31, 2016 105,600 120
December 31, 2017 100,000 125
Instructions
Use the dollar-value LIFO method to compute the ending inventory for Johnson Company for 2013 through 2017.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
