9 Inventories: Additional Valuation Issues BRIEF EXERCISES 9
BRIEF EXERCISES
BE9-1 (L01) Presented below is information related to Rembrandt Inc.’s inventory…
Determine the following: (a) the net realizable value for each item, and (b) the carrying value of each item under LCNRV.
BE9-2 (L01) Floyd Corporation has the following four items in its ending inventory…
Determine the following: (a) the LCNRV for each item, and (b) the amount of write-down, if any, using (1) an item-by-item LCNRV evaluation and (2) a total category LCNRV evaluation.
BE9-3 (L01) Kumar Inc. uses a perpetual inventory system. At January 1, 2017, inventory was $214,000,000 at both cost and net realizable value. At December 31, 2017, the inventory was $286,000,000 at cost and $265,000,000 at net realizable value. Prepare the entry under (a) the cost-of-goods-sold method and (b) the loss method.
BE9-4 (L02) Presented below is information related to Rembrandt Inc.’s inventory, assuming Rembrandt uses lower-of-LIFO cost-or-market…
Determine the following:
(a) the two limits to market value (i.e., the ceiling and the floor) that should be used in the lower-of-cost- or-market computation for skis,
(b) the cost amount that should be used in the lower-of-cost-or-market comparison of boots, and
(c) the market amount that should be used to value parkas on the basis of the lower-of-cost-or-market.
BE9-5 (L02) Kumar Inc. uses LIFO inventory costing. At January 1, 2017, inventory was $214,000 at both cost and market value. At December 31, 2017, the inventory was $286,000 at cost and $265,000 at market value. Prepare the necessary December 31 entry under (a) the cost-of-goods-sold method and (b) the loss method.
BE9-6 (L03) Bell, Inc. buys 1,000 computer game CDs from a distributor who is discontinuing those games. The purchase price for the lot is $8,000. Bell will group the CDs into three price categories for resale, as indicated below…
Determine the cost per CD for each group, using the relative sales value method.
BE9-7 (L03) Kemper Company signed a long-term noncancelable purchase commitment with a major supplier to purchase raw materials in 2018 at a cost of $1,000,000. At December 31, 2017, the raw materials to be purchased have a market value of $950,000. Prepare any necessary December 31, 2017, entry.
BE9-8 (L03) Use the information for Kemper Company from BE9-7. In 2018, Kemper paid $1,000,000 to obtain the raw materials which were worth $950,000. Prepare the entry to record the purchase.
BE9-9 (L04) Fosbre Corporation’s April 30 inventory was destroyed by fire. January 1 inventory was $150,000, and purchases for January through April totaled $500,000. Sales revenue for the same period was $700,000. Fosbre’s normal gross profit percentage is 35% on sales. Using the gross profit method, estimate Fosbre’s April 30 inventory that was destroyed by fire.
BE9-10 (L05) Boyne Inc. had beginning inventory of $12,000 at cost and $20,000 at retail. Net purchases were $120,000 at cost and $170,000 at retail. Net markups were $10,000, net markdowns were $7,000, and sales revenue was $147,000. Compute ending inventory at cost using the conventional retail method.
BE9-11 (L06) In its 2015 annual report, Gap Inc. reported inventory of $1,889 million on January 31, 2015, and $1,928 million on February 1, 2014, cost of goods sold of $10,146 million for 2015, and net sales of $16,435 million. Compute Gap’s inventory turnover and the average days to sell inventory for the fiscal year 2015.
*BE9-12 (L07) Use the information for Boyne Inc. from BE9-10. Compute ending inventory at cost using the LIFO retail method.
*BE9-13 (L07) Use the information for Boyne Inc. from BE9-10, and assume the price level increased from 100 at the beginning of the year to 115 at year-end. Compute ending inventory at cost using the dollar-value LIFO retail method.
