9 Inventories: Additional Valuation Issues EXERCISES 9.2
E9-17 (L04) (Gross Profit Method) You are called by Tim Duncan of Spurs Co. on July 16 and asked to prepare a claim for insurance as a result of a theft that took place the night before. You suggest that an inventory be taken immediately. The following data are available…
Instructions
Compute the claim against the insurance company.
E9-18 (L04) (Gross Profit Method) Gheorghe Moresan Lumber Company handles three principal lines of merchandise with these varying rates of gross profit on cost…
Instructions
Submit your estimate of the inventory amounts immediately preceding the fire.
E9-19 (L04) (Gross Profit Method) Presented below is information related to Aaron Rodgers Corporation for the current year…
Instructions
Compute the ending inventory, assuming that (a) gross profit is 45% of sales, (b) gross profit is 60% of cost, (c) gross profit is 35% of sales, and (d) gross profit is 25% of cost.
E9-20 (L05) (Retail Inventory Method) Presented below is information related to Bobby Engram Company.
Cost Retail
…
Instructions
(a) Compute the ending inventory at retail.
(b) Compute a cost-to-retail percentage (round to two decimals) under the following conditions.
(1) Excluding both markups and markdowns.
(2) Excluding markups but including markdowns.
(3) Excluding markdowns but including markups.
(4) Including both markdowns and markups.
(c) Which of the methods in (b) above (1, 2, 3, or 4) does the following?
(1) Provides the most conservative estimate of ending inventory.
(2) Provides an approximation of lower-of-cost-or-market.
(3) Is used in the conventional retail method.
(d) Compute ending inventory at lower-of-cost-or-market (round to nearest dollar).
(e) Compute cost of goods sold based on (d).
(f) Compute gross margin based on (d).
E9-21 (L05) (Retail Inventory Method) Presented below is information related to Ricky Henderson Company…
Instructions
Compute the inventory by the conventional retail inventory method.
E9-22 (L05) (Retail Inventory Method) The records of Ellen’s Boutique report the following data for the month of April…
Instructions
Compute the ending inventory by the conventional retail inventory method.
E9-23 (L06) (Analysis of Inventories) The financial statements of ConAgra Foods, Inc.’s 2014 annual report disclose the following information.
Instructions
Compute ConAgra’s (a) inventory turnover and (b) the average days to sell inventory for 2014 and 2013.
*E 9-24 (L07) (Retail Inventory Method—Conventional and LIFO) Keller Company began operations on January 1, 2016, adopting the conventional retail inventory system. None of the company’s merchandise was marked down in 2016 and, because there was no beginning inventory, its ending inventory for 2016 of $38,100 would have been the same under either the conventional retail system or the LIFO retail system.
On December 31, 2017, the store management considers adopting the LIFO retail system and desires to know how the December 31, 2017, inventory would appear under both systems. All pertinent data regarding purchases, sales, markups, and markdowns are shown below. There has been no change in the price level.
Cost Retail Inventory, Jan. 1, 2017 $ 38,100 $ 60,000
Markdowns (net) 13,000
Markups (net) 22,000
Purchases (net) 130,900 178,000
Sales (net) 167,000
Instructions
Determine the cost of the 2017 ending inventory under both (a) the conventional retail method and (b) the LIFO retail method.
*E9-25 (L07) (Retail Inventory Method—Conventional and LIFO) Leonard Company began operations late in 2016 and adopted the conventional retail inventory method. Because there was no beginning inventory for 2016 and no markdowns during
2016, the ending inventory for 2016 was $14,000 under both the conventional retail method and the LIFO retail method. At the end of 2017, management wants to compare the results of applying the conventional and LIFO retail methods. There was no change in the price level during 2017. The following data are available for computations…
Instructions
Compute the cost of the 2017 ending inventory under both (a) the conventional retail method and (b) the LIFO retail method.
*E 9-26 (L07) (Dollar-Value LIFO Retail) You assemble the following information for Seneca Department Store, which computes its inventory under the dollar-value LIFO method…
Instructions
Compute the cost of the inventory on December 31, 2017, assuming that the inventory at retail is (a) $294,300 and (b) $365,150.
*E 9-27 (L07) (Dollar-Value LIFO Retail) Presented below is information related to Langston Hughes Corporation…
Instructions
Compute the ending inventory under the dollar-value LIFO method at December 31, 2018. The cost-to-retail ratio for 2018 was 60%.
*E 9-28 (L07) (Conventional Retail and Dollar-Value LIFO Retail) Amiras Corporation began operations on January 1, 2017, with a beginning inventory of $30,100 at cost and $50,000 at retail. The following information relates to 2017…
Instructions
(a) Assume Amiras decided to adopt the conventional retail method. Compute the ending inventory to be reported in the balance sheet.
(b) Assume instead that Amiras decides to adopt the dollar-value LIFO retail method. The appropriate price indexes are 100 at January 1 and 110 at December 31. Compute the ending inventory to be reported in the balance sheet.
(c) On the basis of the information in part (b), compute cost of goods sold.
* E9-29 (L07) (Dollar-Value LIFO Retail) Connie Chung Corporation adopted the dollar-value LIFO retail inventory method on January 1, 2016. At that time the inventory had a cost of $54,000 and a retail price of $100,000. The following information is available…
Instructions
Compute the ending inventory at December 31 of the years 2016–2019. (Round to the nearest dollar.)
* E9-30 (L07) (Change to LIFO Retail) John Olerud Ltd., a local retailing concern in the Bronx, New York, has decided to change from the conventional retail inventory method to the LIFO retail method starting on January 1, 2018. The company recomputed its ending inventory for 2017 in accordance with the procedures necessary to switch to LIFO retail. The inventory computed was $212,600.
Instructions
Assuming that John Olerud Ltd.’s ending inventory for 2017 under the conventional retail inventory method was $205,000, prepare the appropriate journal entry on January 1, 2018.
