How are inventory losses disclosed on the income statement

Assignment Help Accounting Basics

Reference no: EM13123038

1. The Rock Shop shows the following data related to an item of inventory:

Inventory, January 1 100 units @ $5.00
Purchase, January 9 300 units @ $5.40
Purchase, January 19 70 units @ $6.00
Inventory, January 31 100 units
Instructions:

(a) What value should be assigned to the ending inventory using FIFO?

(b) What value should be assigned to cost of goods sold using LIFO?

2. At 12/31/12, the end of Jenner Company's first year of business, inventory was $4,100 and $2,800 at cost and market, respectively. Following is data relative to the 12/31/13 inventory of Jenner:

Original Net Net Realizable Appropriate
Cost Replacement Realizable Value Less Inventory
Item Per Unit Cost . Value . Normal Profit Value .
A $.65 $.45 __________________________________
B .45 .40 ___________________________________
C .70 .75 ___________________________________
D .75 .65 ____________________________________
E .90 .85 ____________________________________

Selling price is $1.00/unit for all items. Disposal costs amount to 10% of selling price and a "normal" profit is 30% of selling price. There are 1,000 units of each item in the 12/31/13 inventory.

Instructions

(a) Prepare the entry at 12/31/12 necessary to implement the lower-of-cost-or-market procedure assuming Jenner uses a contra account for its balance sheet.

(b) Complete the last three columns of the 12/31/13 schedule above based upon the lower-of-cost-or-market rules.

(c ) Prepare the entry(ies) necessary at 12/31/13 based on the data above.

(d) How are inventory losses disclosed on the income statement.

3. A machine cost $140,000, has annual depreciation expense of $28,000, and has accumulated depreciation of $70,000 on December 31, 2012. On April 1, 2013, when the machine has a fair value of $56,000, it is exchanged for a similar machine with a fair value of $168,000 and the proper amount of cash is paid. The exchange lacked commercial substance.

Required:

Prepare all entries that are necessary on April 1, 2013.

4. A machine which cost $300,000 is acquired on October 1, 2012. Its estimated salvage value is $30,000, and its expected life is eight years.

Required:

Calculate depreciation expense for 2012 and 2013 by each of the following methods, showing the figures used.

(a) Double-declining balance
(b) Sum-of-the-years'-digits

Reference no: EM13123038

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