Ex. 226
Finch Company is preparing the annual financial statements dated December 31, 2014. Information about inventory stocked for regular sale follows:
QuantityUnit CostNet Realizable
Itemon HandWhen AcquiredValue at year end
A50€20€19
B1004546
C206062
D404038
Instructions
Compute the valuation for the December 31, 2014, inventory using the lower-of-cost-or-net realizable value basis.
Ex. 227
Boyer Company applied FIFO to its inventory and got the following results for its ending inventory.
VCRs140 units at a cost per unit of $65
DVD players210 units at a cost per unit of $75
iPods175 units at a cost per unit of $80
The cost of purchasing units at year-end was VCRs $71, DVD players $72, and iPods $78.
Instructions
Determine the amount of ending inventory at lower-of-cost-or-net realizable value.
Ex. 228
Linden Watch Company reported the following income statement data for a 2-year period.
2013 2014
Sales$280,000$320,000
Cost of goods sold
Beginning inventory32,00044,000
Cost of goods purchased 193,000 225,000
Cost of goods available for sale225,000269,000
Ending inventory 44,000 52,000
Cost of goods sold 181,000 217,000
Gross profit$ 99,000$103,000
Linden uses a periodic inventory system. The inventories at January 1, 2013, and December 31, 2014, are correct. However, the ending inventory at December 31, 2013, was overstated $5,000.
Ex. 228(Cont.)
Instructions
(a)Prepare correct income statement data for the 2 years.
(b)What is the cumulative effect of the inventory error on total gross profit for the 2 years?