Spiceland C8 Solutions.docx

Spiceland C8 Solutions.docx

《Spiceland C8 Solutions.docx》由会员分享，可在线阅读，更多相关《Spiceland C8 Solutions.docx（67页珍藏版）》请在冰点文库上搜索。

SpicelandC8Solutions

Chapter8Inventories:

Measurement

QuestionsforReviewofKeyTopics

Question8-1

Inventoryforamanufacturingcompanyconsistsof

（1）rawmaterials,

（2）workinprocess,and（3）finishedgoods.Rawmaterialsrepresentthecost,primarilypurchasepriceplusfreightcharges,ofgoodspurchasedfromothermanufacturersthatwillbecomepartofthefinishedproduct.Work-in-processinventoryrepresentstheproductsthatarenotyetcomplete.Thecostofworkinprocessincludesthecostofrawmaterialsusedinproduction,thecostoflaborthatcanbedirectlytracedtothegoodsinprocess,andanallocatedportionofothermanufacturingcosts,calledmanufacturingoverhead.Whenthemanufacturingprocessiscompleted,thesecoststhathavebeenaccumulatedinworkinprocessaretransferredtofinishedgoods.

Question8-2

Beginninginventoryplusnetpurchasesfortheperiodequalscostofgoodsavailableforsale.Themaindifferencebetweenaperpetualandaperiodicsystemisthattheperiodicsystemallocatescostofgoodsavailableforsaletoendinginventoryandcostofgoodssoldonlyattheendoftheperiod.Theperpetualsystemaccomplishesthisallocationbydecreasinginventoryandincreasingcostofgoodssoldeachtimegoodsaresold.

Question8-3

PerpetualSystemPeriodicSystem

（1）purchaseofmerchandisedebitinventorydebitpurchases

（2）saleofmerchandisedebitcostofgoodssold;

creditinventorynoentry

（3）returnofmerchandisecreditinventorycreditpurchasereturns

（4）paymentoffreightdebitinventorydebitfreight-in

Question8-4

Inventoryshippedf.o.b.shippingpointisincludedintheinventoryofthepurchaserwhenthemerchandisereachesthecommoncarrier.LaetnerCorporationrecordsthepurchasein2011andincludestheshipmentinitsendinginventory.BocknerCompanyrecordsthesalein2011.Inventoryshippedf.o.b.destinationisincludedintheinventoryoftheselleruntilitreachesthepurchaser’slocation.Bocknerwouldincludethemerchandiseinits2011endinginventoryandthesale/purchasewouldberecordedin2012.

AnswerstoQuestions（continued）

Question8-5

Aconsignmentisanarrangementunderwhichgoodsarephysicallytransferredtoanothercompany（theconsignee）,butthetransferor（consignor）retainslegaltitle.Iftheconsigneecan’tfindabuyer,thegoodsarereturnedtotheconsignor.Goodsheldonconsignmentareincludedintheinventoryoftheconsignoruntilsoldbytheconsignee.

Question8-6

Bythegrossmethodpurchasediscountsnottakenareviewedaspartofinventorycost.Bythenetmethodpurchasediscountsnottakenareconsideredinterestexpense,becausetheyareviewedascompensationtothesellerforprovidingfinancingtothebuyer.

Question8-7

1.Beginninginventory—increase

2.Purchases—increase

3.Endinginventory—decrease

4.Purchasereturns—decrease

5.Freight-in—increase

Question8-8

Fourmethodsofassigningcosttoendinginventoryandcostofgoodssoldare

（1）specificidentification,

（2）first-in,first-out（FIFO）,（3）last-in,first-out（LIFO）,and（4）averagecost.Thespecificidentificationmethodrequireseachunitsoldduringtheperiodoreachunitonhandattheendoftheperiodtobetracedthroughthesystemandmatchedwithitsactualcost.First-in,first-out（FIFO）assumesthatunitssoldarethefirstunitsacquired.Thelast-in,first-out（LIFO）methodassumesthattheunitssoldarethemostrecentunitspurchased.Theaveragecostmethodassumesthatcostofgoodssoldandendinginventoryconsistofamixtureofallthegoodsavailableforsale.Theaverageunitcostappliedtogoodssoldorendinginventoryisanaverageunitcostweightedbythenumberofunitsacquiredatthevariousunitprices.

Question8-9

Whencostsaredeclining,LIFOwillresultinalowercostofgoodssoldandhigherincomethanFIFO.ThisisbecauseLIFOwillincludeincostofgoodssoldthemostrecentlypurchasedlowercostmerchandise.LIFOalsowillprovideahigherendinginventoryinthebalancesheet.

AnswerstoQuestions（continued）

Question8-10

ProponentsofLIFOarguethatitprovidesabettermatchofrevenuesandexpensesbecausecostofgoodssoldincludesthecostsofthemostrecentpurchases.Thesearematchedwithsalesthatreflectacurrentsellingprice.Ontheotherhand,inventorycostsinthebalancesheetgenerallyareoutofdatebecausetheyarederivedfromoldpurchasetransactions.Itisconceivablethatacompany’sLIFOinventorybalancecouldbebasedonunitcostsactuallyincurredseveralyearsearlier.Wheninventoryquantitydeclinesduringaperiod,thentheseout-of-dateinventorylayerswillbeliquidatedandcostofgoodssoldwillmatchnoncurrentcostswithcurrentsellingprices.

Question8-11

ManycompanieschoosetheLIFOinventorymethodtoreduceincometaxesinperiodswhenpricesarerising.Inperiodsofrisingprices,LIFOresultsinahighercostofgoodssoldandthereforealowernetincomethantheothermethods.Thecompanies’incometaxreturnswillreportlowertaxableincomesusingLIFOandlowertaxeswillbepaidcurrently.IfacompanyusesLIFOtomeasureitstaxableincome,IRSregulationsrequirethatLIFOalsobeusedtomeasureincomereportedtoinvestorsandcreditors.

Question8-12

Thegrossprofit,inventoryturnover,andaveragedaysininventoryratiosaredesignedtomonitorinventories.Thegrossprofitratioiscalculatedbydividinggrossprofit（netsalesminuscostofgoodssold）bynetsales.Inventoryturnoveriscalculatedbydividingcostofgoodssoldbyaverageinventory,andwecomputeaveragedaysininventorybydividingthenumberofdaysintheperiodbytheinventoryturnoverratio.

Question8-13

ALIFOinventorypoolgroupsinventoryunitsintopoolsbasedonphysicalsimilaritiesoftheindividualunits.Theaveragecostforallofapool’sbeginninginventoryandforallofapool’spurchasesduringtheperiodisusedinsteadofindividualunitcosts.Ifthequantityofendinginventoryforthepoolincreases,thenendinginventorywillconsistofthebeginninginventoryplusalayeraddedduringtheperiodattheaverageacquisitioncostforthepool.

Question8-14

Thedollar-valueLIFOmethodhasimportantadvantages.First,itsimplifiestherecordkeepingprocedurescomparedtounitLIFObecausenoinformationisneededaboutunitflows.Second,itminimizestheprobabilityoftheliquidationofLIFOinventorylayers,evenmoresothantheuseofpoolsalone,throughtheaggregationofmanytypesofinventoryintolargerpools.Inaddition,firmsthatdonotreplaceunitssoldwithnewunitsofthesamekindcanusethemethod.

AnswerstoQuestions（concluded）

Question8-15

Afterdeterminingendinginventoryatyear-endcost,thefollowingstepsremain:

1.Convertendinginventoryvaluedatyear-endcosttobaseyearcost.

2.Identifythelayersinendinginventorywiththeyearstheywerecreated.

3.Converteachlayer’sbaseyearcostmeasurementtolayeryearcostmeasurementusingthelayeryear’scostindexandthensumthelayers.

Question8-16

Theprimarydifference

betweenU.S.GAAPandIFRSinthemethodsallowedtovalueinventoryisthatIFRSdoesnotallowtheuseoftheLIFOmethod.

BRIEFEXERCISES

BriefExercise8-1

Beginninginventory$186,000

Plus:

Purchases945,000

Less:

Costofgoodssold（982,000）

Endinginventory$149,000

BriefExercise8-2

Torecordthepurchaseofinventoryonaccount.

Inventory845,000

Accountspayable845,000

Torecordsalesonaccountandcostofgoodssold.

Accountsreceivable1,420,000

Salesrevenue1,420,000

Costofgoodssold902,000

Inventory902,000

BriefExercise8-3

Bothshipmentsshouldbeincludedininventory.Thegoodsshippedtoacustomerf.o.b.destinationdidnotarriveatthecustomer’slocationuntilafterthefiscalyear-end.TheybelongtoKellyuntiltheyarriveatthecustomer’slocation.TitletothegoodsshippedfromasuppliertoKellyonDecember30,f.o.b.shippingpoint,changedhandsonDecember30.

BriefExercise8-4

Purchaseprice=10unitsx$25,000=$250,000

December28,2011

Inventory250,000

Accountspayable250,000

January6,2012

Accountspayable250,000

Cash（99%x$250,000）247,500

Inventory（1%x$250,000）2,500

BriefExercise8-5

December28,2011

Inventory（99%x$250,000）247,500

Accountspayable247,500

January6,2012

Accountspayable247,500

Cash247,500

BriefExercise8-6

Costofgoodsavailableforsale:

Beginninginventory（200x$25）$5,000

Purchases:

100x$28$2,800

200x$306,0008,800

Costofgoodsavailable（500units）$13,800

First-in,first-out（FIFO）

Costofgoodsavailableforsale（500units）$13,800

Less:

Endinginventory（determinedbelow）（8,100）

Costofgoodssold$5,700

Costofendinginventory:

Dateof

purchaseUnitsUnitcostTotalcost

January875$28$2,100

January19200306,000

Total$8,100

Averagecost

Costofgoodsavailableforsale（500units）$13,800

Less:

Endinginventory（determinedbelow）（7,590）

Costofgoodssold$6,210*

Costofendinginventory:

$13,800

Weighted-averageunitcost==$27.60

500units

275unitsx$27.60=$7,590

*Alternatively,couldbedeterminedbymultiplyingtheunitssoldbytheaverage

cost:

225unitsx$27.60=$6,210

BriefExercise8-7

First-in,first-out（FIFO）

Costofgoodssold:

DateofCostof

saleUnitssoldUnitsSoldTotalCost

January10125（fromBeg.Inv.）$25$3,125

January2575（fromBeg.Inv.）251,875

25（from1/8purchase）28700

Total225$5,700

Endinginventory:

Dateof

purchaseUnitsUnitcostTotalcost

January875