Question 1

On September 5, 2018, Howard Corporation signed a purchase commitment to purchase inventory for $130,000 on or before March 31, 2019. The company's fiscal year-end is December 31. The contract was exercised on March 4, 2019, and the inventory was purchased for cash at the contract price. On the purchase date of March 4, the market price of the inventory was $116,000. The market price of the inventory on December 31, 2018, was $120,000. The company uses a perpetual inventory system.
Required:
1. Prepare the necessary adjusting journal entry (if any is required) on December 31, 2018.
2. Prepare the journal to record the purchase on March 4, 2019.

Accepted Answer

The answer of On September 5, 2018, Howard Corporation signed...

Question 2

Charleston Company has elected to use the dollar-value LIFO retail method to value its inventory. The following data has been accumulated from the accounting records:  Required:
Estimate the ending inventory for December 31, 2018.

Accepted Answer

The answer of Charleston Company has elected to use the...

Question 3

Harley Inc. uses the conventional retail method to estimate its ending inventories. The following data has been summarized for December 31, 2018:  Required:
Estimate the cost of ending inventory applying the conventional retail method.

Accepted Answer

The answer of Harley Inc. uses the conventional retail method...

Question 4

In the following questions, inventory errors are noted for 2018. Assume that the errors are not discovered until 2019, and that the company uses a periodic inventory system. Indicate the effect of the error, if any, on the accounts noted in the columns, using the following code:
U = Understated; O = Overstated; NE = No effect

-$$\begin{array} { | l | l | l | } 
\hline  { \text { Eiror } } & \text { Cost of goods sold } & \text { Retained earnings } \
\hline \text { The company ignored its purchase of } & & \
\text { inventory that was bought FOB shipping point } & & \
\text { and was in transit at year end } & & \
\hline
\end{array}$$

Accepted Answer

The answer of In the following questions, inventory errors are...

Question 5

In the year 2018, the internal auditors of Goofy Co. discovered that goods costing $25 million that were purchased in December of 2017 were recorded for $20 million. The goods were properly measured in the December 31, 2017, ending physical inventory.
Required:
Prepare the journal entry needed in 2018 to correct the error. Also, briefly describe any other measures Goofy would take in connection with correcting the error. (Ignore income taxes.)

Accepted Answer

The answer of In the year 2018, the internal auditors...

Question 6

Billingsly Products uses the conventional retail method to estimate its ending inventories. The following data has been summarized for the year 2018:  Required:
Estimate the ending inventory as of December 31, 2018.

Accepted Answer

The answer of Billingsly Products uses the conventional retail method...

Question 7

Murdock Industries uses a periodic inventory system and the LIFO retail method to estimate its ending inventories. The following data has been summarized for December 31, 2018:  Required:
Estimate the LIFO cost of ending inventory. Assume stable retail prices during the period.

Accepted Answer

The answer of Murdock Industries uses a periodic inventory system...

Question 8

In 2018, the internal auditors of Blooper Inc. discovered that goods costing $12 million that were shipped f.o.b. shipping point in December of 2017 were in transit on December 31. The goods were recorded as a purchase in December of 2017 but were not included in the 2017 year-end inventory.
Required:
Prepare the journal entry needed in 2018 to correct the error. Also, briefly describe any other measures Blooper would take in connection with correcting the error. (Ignore income taxes.)

Accepted Answer

The answer of In 2018, the internal auditors of Blooper...

Question 9

In the following questions, inventory errors are noted for 2018. Assume that the errors are not discovered until 2019, and that the company uses a periodic inventory system. Indicate the effect of the error, if any, on the accounts noted in the columns, using the following code:
U = Understated; O = Overstated; NE = No effect

-$$\begin{array} { | c | c | c | } 
\hline \text { Error } & \text { Cost of goods sold } & \text { Retained earnings } \
\hline \text { Double counted items in ending inventory } & & \
\hline
\end{array}$$

Accepted Answer

The answer of In the following questions, inventory errors are...

Question 10

In the following questions, inventory errors are noted for 2018. Assume that the errors are not discovered until 2019, and that the company uses a periodic inventory system. Indicate the effect of the error, if any, on the accounts noted in the columns, using the following code:
U = Understated; O = Overstated; NE = No effect

-$$\begin{array} { | l | l | l | } 
\hline { \text { Error } } & \text { Cost of goods sold } & \text { Retained earnings } \
\hline \text { Unrecorded purchases } & & \
\hline
\end{array}$$

Accepted Answer

The answer of In the following questions, inventory errors are...

Question 11

Ramsgate Company has used the FIFO method for inventory valuation since it began business in 2014, but has elected to change to the average cost method starting in 2017. Year-end inventory valuations under each method are shown below:  Required:
How, and when, would Ramsgate reflect the change in accounting principle in its financial statements (ignore income taxes)?

Accepted Answer

The answer of Ramsgate Company has used the FIFO method...

Question 12

Zanesville Pots Co. uses the conventional retail method to estimate ending inventories. The following data has been summarized for the year ended December 31, 2018:  Required:
Estimate the cost of ending inventory applying the conventional retail method.

Accepted Answer

The answer of Zanesville Pots Co. uses the conventional retail...

Question 13

In the following questions, inventory errors are noted for 2018. Assume that the errors are not discovered until 2019, and that the company uses a periodic inventory system. Indicate the effect of the error, if any, on the accounts noted in the columns, using the following code:
U = Understated; O = Overstated; NE = No effect

-$$\begin{array} { | l | l | l | } 
\hline { \text { Error } } & \text { Cost of goods sold } & \text { Retained earnings } \
\hline \text { Understated beginning inventory } & & \
\hline
\end{array}$$

Accepted Answer

The answer of In the following questions, inventory errors are...

Question 14

Green Acres Co. has elected to use the dollar-value LIFO retail method to value its inventory. The following data has been accumulated from the accounting records:
Pertinent retail price indexes:  Estimate the cost of ending inventory for December 31, 2018.

Accepted Answer

The answer of Green Acres Co. has elected to use...

Question 15

Cindy Lou Linens uses the conventional retail method to estimate its ending inventories. The company records sales net of employee discounts. The following partial data has been summarized for the year ended December 31, 2018:  Required:
Compute the net markups for Cindy Lou Linens during 2018.

Accepted Answer

The answer of Cindy Lou Linens uses the conventional retail...

Question 16

In the following questions, inventory errors are noted for 2018. Assume that the errors are not discovered until 2019, and that the company uses a periodic inventory system. Indicate the effect of the error, if any, on the accounts noted in the columns, using the following code:
U = Understated; O = Overstated; NE = No effect

-$\begin{array}{|c|c|c|}
\hline {\text { Error }} & \text { Cost of goods sold } & \text { Retained earnings } \
\hline \text { Recorded purchases for } \$ 523,000 \text { that } & & \
\text { should have been } \$ 532,000 . &\\hline 
\end{array}$

Accepted Answer

The answer of In the following questions, inventory errors are...

Question 17

New York Sales Inc. uses the conventional retail method to estimate its ending inventories. The following data has been summarized for December 31, 2018:  Required:
Compute the cost-to-retail percentage used by New York Sales Inc.

Accepted Answer

The answer of New York Sales Inc. uses the conventional...

Question 18

Orlando Company has used the average cost method for inventory valuation since it began business in 2014, but has elected to change to the FIFO method starting in 2017. Year-end inventory valuations under each method are shown below: $\begin{array}{rrr}&\text { Average }\\text { Year }&\text { Cost }&\text { FIFO }\
2014 & \$ 42,000& \$ 47,000 \
2015 & 53,000& 61,000\
2016 & 59,00 0& 68,00 0 \
2017 & 62,000& 72,000
\end{array}$ Required:
How would Orlando reflect the change in accounting principle in its financial statements (ignore income taxes)?

Accepted Answer

The answer of Orlando Company has used the average cost...

Question 19

Cornhusker Can Co. uses the conventional retail method to estimate ending inventories. The following data has been summarized for year ended December 31, 2018:  Required:
Estimate the cost of ending inventory applying the conventional retail method. Assume that sales are recorded net of employee discounts.

Accepted Answer

The answer of Cornhusker Can Co. uses the conventional retail...

Question 20

Littleton Company uses a periodic inventory system and the LIFO retail method to estimate its ending inventories. The following partial data has been summarized for December 31, 2018:  Required:
Determine the cost-to-retail percentage used by Littleton. Assume stable retail prices during the period.

Accepted Answer

The answer of Littleton Company uses a periodic inventory system...

Quiz 9: Inventories: Additional Issues

Charleston Company has elected to use the dollar-value LIFO retail method to value its inventory. The following data has been accumulated from the accounting records: Required: Estimate the ending inventory for December 31, 2018.

Harley Inc. uses the conventional retail method to estimate its ending inventories. The following data has been summarized for December 31, 2018: Required: Estimate the cost of ending inventory applying the conventional retail method.

Billingsly Products uses the conventional retail method to estimate its ending inventories. The following data has been summarized for the year 2018: Required: Estimate the ending inventory as of December 31, 2018.

Murdock Industries uses a periodic inventory system and the LIFO retail method to estimate its ending inventories. The following data has been summarized for December 31, 2018: Required: Estimate the LIFO cost of ending inventory. Assume stable retail prices during the period.

Zanesville Pots Co. uses the conventional retail method to estimate ending inventories. The following data has been summarized for the year ended December 31, 2018: Required: Estimate the cost of ending inventory applying the conventional retail method.

Green Acres Co. has elected to use the dollar-value LIFO retail method to value its inventory. The following data has been accumulated from the accounting records: Pertinent retail price indexes: Estimate the cost of ending inventory for December 31, 2018.

Cindy Lou Linens uses the conventional retail method to estimate its ending inventories. The company records sales net of employee discounts. The following partial data has been summarized for the year ended December 31, 2018: Required: Compute the net markups for Cindy Lou Linens during 2018.

New York Sales Inc. uses the conventional retail method to estimate its ending inventories. The following data has been summarized for December 31, 2018: Required: Compute the cost-to-retail percentage used by New York Sales Inc.

Littleton Company uses a periodic inventory system and the LIFO retail method to estimate its ending inventories. The following partial data has been summarized for December 31, 2018: Required: Determine the cost-to-retail percentage used by Littleton. Assume stable retail prices during the period.