Solution manual financial accounting 8th by harrison CH06

To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter Inventory & Cost of Goods Sold Short Exercises (10 min.) Inventory………………………… Cash………………………… 424 Billions 3.8 3.8 Accounts Receivable………… Sales Revenue……………… 19.7 Cost of Goods Sold…………… Inventory…………………… 4.5 Cash……………………………… Accounts Receivable……… 18.8 Financial Accounting 8/e Solutions Manual 19.7 4.5 18.8 S 6-1 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com (10-15 min.) S 6-2 (Journal entries) Inventory………………………………… Accounts Payable…………………… 120,000 Amounts Receivable…………………… Sales Revenue……………………… 150,000 Cost of Goods Sold…………………… Inventory ($120,000 × 75)………… 90,000 Cash ($150,000 × 30)………………… Accounts Receivable……………… 45,000 120,000 150,000 90,000 45,000 (Financial statements) BALANCE SHEET Current assets: Inventory ($120,000 − $90,000)……………… $ 30,000 INCOME STATEMENT Sales revenue……………………………………… Cost of goods sold……………………………… Gross profit………………………………………… Chapter $150,000 90,000 $60,000 Inventory & Cost of Goods Sold 425 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com (15-20 min.) a Average Cost Cost of goods sold: Average (26 × $154.71) FIFO $1,260 + (17 × $160) LIFO $4,000 + (1 × $140) Ending inventory: Average (8 × $154.71) FIFO (8 × $160) LIFO (8 × $140) b FIFO S 6-3 c LIFO $4,022.46 $3,980 $4,140 $ 1,237.68 $1,280 $1,120 Computations: Units sold = 26 (9 + 25 − 8) Units in ending inventory = Average cost per unit = $154.71 ($1,260 + $4,000) ÷ (9 + 25) Cost per unit: First purchase = $140 ($1,260 ÷ = $140) Second purchase = $160 ($4,000 ÷ 25 = $160) 426 Financial Accounting 8/e Solutions Manual To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com (10-15 min.) S 6-4 Jefferson’s Copy Center Income Statement Year Ended December 31, 2010 Average FIFO LIFO Sales revenue (580 × $20.25) $11,745 $11,745 $11,745 Cost of goods sold (580 × $9.70*) 5,626 (92 × $8.90) + (488 × $9.80) 5,601 (580 × $9.80) 5,684 Gross profit 6,119 6,144 6,061 Operating expenses 3,750 3,750 3,750 Net income $ 2,369 $2,394 $ 2,311 _ * Average cost per unit: Beginning inventory (92 @ $9.00)…………… $ 828 Purchases (680 @ $9.80)………………………… 6,664 Goods available…………………….……………… $7,492 Average cost per unit $7,492 / 772 units…… $ 9.70 Chapter Inventory & Cost of Goods Sold 427 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com (10-15 min.) S 6-5 Jefferson Copy Center Income Statement Year Ended December 31, 2010 Average FIFO Sales revenue (580 × $20.25) $11,745 $11,745 Cost of goods sold (580 × $9.70*) 5,626 (92 × $8.90) + (488 × $9.80) 5,601 (580 × $9.80) Gross profit 6,119 6,144 Operating expenses 3,750 3,750 Income before income tax $2,369 $ 2,394 Income tax expense (30%) $ 711 $ 718 *From S 6-4 428 Financial Accounting 8/e Solutions Manual Method to maximize reported income (before tax) LIFO $11,745 5,684 6,061 3,750 $ 2,311 $ 693 Method to minimize income tax expense To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com (5 min.) S 6-6 Microdata managers can purchase lots of inventory before year end Under LIFO, these high inventory costs go directly to cost of goods sold in the current year As a result, the current year’s net income drops and that saves on income tax Saving on taxes is one reason companies want to decrease their income Student responses may vary (5-10 min.) S 6-7 BALANCE SHEET Current assets: Inventories, at market (which is lower than cost)…… $ 42,000 INCOME STATEMENT Cost of goods sold [$440,000 + ($57,000 − $42,000)]…… $455,000 Chapter Inventory & Cost of Goods Sold 429 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com (15-20 min.) DATE: _ TO: Joe Smith, President of Saxophone Company FROM: Student Name S 6-8 SUBJECT: Proposal for Increasing Net Income We can increase net income by not buying our normal quantities of inventory as we make sales Inventory costs are rising, and the company uses the LIFO inventory method Under LIFO, the high cost of our inventory purchases goes straight into cost of goods sold By slowing our purchases of inventory, we can keep those high costs out of cost of goods sold this year That will keep net income from going lower and will help net income be as high as possible Also, our inventory quantities are above normal, so we don’t need to buy a lot of inventory before year end Student responses will vary 430 Financial Accounting 8/e Solutions Manual To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com (10-15 min.) S 6-9 LIFO Generally associated with saving income taxes FIFO Results in a cost of ending inventory that is close to the current cost of replacing the inventory Specific unit cost Average Used to account for automobiles, jewelry, and art objects Provides a middle-ground measure of ending inventory and cost of goods sold FIFO Maximizes reported income LIFO Matches the most current cost of goods sold against sales revenue LIFO Results in an old measure of the cost of ending inventory LCM Writes inventory down when replacement cost drops below historical cost LIFO Enables a company to buy high-cost inventory at year end and thereby to decrease reported income and income tax FIFO 10 Enables a company to keep reported income from dropping lower by liquidating older layers of inventory Chapter Inventory & Cost of Goods Sold 431 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com (5-10 min.) Gross profit percentage = Inventory turnover = Dollars in Millions $35,482 − $15,333 $35,482 = 0.568 $15,333 = 8.6 times ($1,641 + $1,945) / (5-10 min.) + = − = 432 S 6-10 S 6-11 Beginning inventory…………………………… $ 244,000 Purchases……………………………………….… 1,540,000 Goods available………………………………… 1,784,000 Cost of goods sold: Sales revenue……………………… $4,000,000 Less estimated gross profit (60%) (2,400,000) Estimated cost of goods sold……………… (1,600,000) Estimated cost of ending inventory………… $ 184,000 Financial Accounting 8/e Solutions Manual To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com (5 min.) S 6-12 Correct Amount (Millions) a b c d Net sales (unchanged)……………………………… Inventory ($450 − $14)……………………………… Cost of goods sold ($1,130 + $14)………………… Gross profit ($1,900 − $1,144)……………………… $1,900 $ 436 $1,144 $ 756 (5 min.) S 6-13 Last year’s reported gross profit was understated Correct gross profit last year was $5.5 million ($3.8 + $1.7) This year’s gross profit is overstated Correct gross profit for this year is $3.8 million ($5.5 − $1.7) Chapter Inventory & Cost of Goods Sold 433 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Group Project Student responses will vary 500 Financial Accounting 7/e Solutions Manual To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter Appendix Appendix Short Exercises (10-15 min.) S6A-1 (Journal entries) General Journal Purchases Accounts Payable 1,180 1,180 Purchased inventory on account Accounts Receivable Sales Revenue 3,200 3,200 Sold inventory on account End-of-period entries to update inventory and record Cost of Goods sold: a Cost of Goods Sold Inventory (beginning balance) 480 480 Transfer beginning inventory to COGS b Inventory (ending balance) Cost of Goods Sold 610 610 Set up ending inventory based on physical count c Cost of Goods Sold Purchases 1,180 1,180 Transfer purchases to COGS Chapter Inventory and Cost of Goods Sold 501 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com (10-15 min.) Req Posting general journal entries Inventory 480* 480 610 610 * Beginning inventory was $480 Cost of Goods Sold 480 1,180 1,050 610 Req Cost-of-Goods-Sold Model Beginning inventory + Purchases = Goods available - Ending inventory = Cost of goods sold $ 480 1,180 1,660 610 $1,050 Req Saxton Technologies Income Statement (Partial) Sales revenue Cost of goods sold: Beginning inventory Purchases Goods available Ending inventory Cost of goods sold Gross profit 502 Financial Accounting 7/e Solutions Manual $3,200 480 1,180 1,660 (610) 1,050 $2,150 S6A-2 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Appendix Exercises (10-15 min.) Begin Bal Purchases Jul 15 26 Ending Bal Inventory (5 units @ $59) 295 (3 units @ $59) (13 units @ $69 ( unit @ $79) ( units @ $?) 177 897 79 ? Cost of goods sold (15 units @ $?) Cost of Goods Sold (1) Specific unit cost (2) Average cost E6A-3A ? Ending Inventory (7@ $59) + (8 @ $69) + (1 @ $79) = $985 (15 × $65.82*) = $987.30 (2 @ $59) + (5 @ $69) (7 × $65.82*) = $463 = $460.74 _ *Average cost per unit = ($295 + 177 + 897 + 79) (5 + + 13 + 1) = $65.82 (3) FIFO (8 @ $59) + (7@ $69) (4) LIFO (1 @ $79) + (13@ $69) + (1@ $59) = = $955 $1,035 Chapter (6 @ $69) + (1 @ $79) = $493 (7 @ $59) = $413 Inventory and Cost of Goods Sold 503 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com (10-15 min.) E6A-4A Reqs & (Journal entries) General Journal Purchases Accounts Payable 1,153 1,153 Purchased inventory on account Accounts Receivable Sales Revenue 4,425 4,425 Sold inventory on account End-of-period entries to update inventory and record Cost of Goods Sold: a Cost of Goods Sold Inventory (beginning balance) 295 295 Transfer beginning inventory to COGS b Inventory (ending balance) Cost of Goods Sold 413 413 Set up ending inventory based on physical count c Cost of Goods Sold Purchases Transfer purchases to COGS 504 Financial Accounting 7/e Solutions Manual 1,035 1,035 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com (continued) E6A-4A Req.3 Posting general journal entries Cost of Goods Sold Beginning Inventory 295 Ending Inventory Purchases 1,153 Cost of goods sold 1,035 413 Req Cost-of-Goods-Sold Model Beginning inventory + Purchases = Goods available - Ending inventory = Cost of goods sold 295 1,153 1,448 413 1,035 Chapter Inventory and Cost of Goods Sold 505 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com (10-15 min.) Begin Bal Purchases Dec 15 26 Ending Bal Inventory (6 units @ $60) 360 (4 units @ $60) (13 units @ $70) ( unit @ $80) ( units @ $?) 240 910 160 ? Cost of goods sold Cost of Goods Sold (1) Specific unit cost (2) Average cost E6A-5B ? Ending Inventory (6@ $60) + (8 @ $70) + (2 @ $80) = $1,080 (16 × $66.80*) (16 units @ $?) = $1,068.80 (4 @ $60) + (5 @ $70) (9 × $66.80*) = $590 = $601.20 _ *Average cost per unit = ($360 + 240 + 910 + 160) (6 + + 13 + 2) = $66.80 (3) FIFO (10@ $60) + (6@ $70) (4) LIFO (2 @ $80) + (13@ $70) + (1@ $60) 506 = = Financial Accounting 7/e Solutions Manual $1,020 $1,130 (2@ $80) + (7@ $70) = $650 (9 @ $60) = $540 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com (10-15 min.) E6A-6B Reqs & (Journal entries) General Journal Purchases Accounts Payable 1,310 1,310 Purchased inventory on account Accounts Receivable Sales Revenue 5,040 5,040 Sold inventory on account End-of-period entries to update inventory and record Cost of Goods Sold: a Cost of Goods Sold Inventory (beginning balance) 360 360 Transfer beginning inventory to COGS b Inventory (ending balance) Cost of Goods Sold 540 540 Set up ending inventory based on physical count c Cost of Goods Sold Purchases 1,130 1,130 Transfer purchases to COGS Chapter Inventory and Cost of Goods Sold 507 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com (continued) Req.3 Posting general journal entries Cost of Goods Sold Beginning Inventory 360 Ending Inventory Purchases 1,310 Cost of goods sold 1,130 540 Req Cost-of-Goods-Sold Model Beginning inventory + Purchases = Goods available - Ending inventory = Cost of goods sold 508 Financial Accounting 7/e Solutions Manual $ 360 1,310 1,670 540 $1,130 E6A-6B To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Appendix Problems (20-25 min.) P6A-7A Req Inventory (48 units @ $16) 768 Begin Bal Purchases Jul 30 Ending Bal (80 units @ $17) (22 units @ $18 (60 units @ $?) 1,360 Cost of goods sold 396 (90 units @ $?) ? Cost of Goods Sold ? Ending Inventory FIFO (48@ $16) + (42@ $17) = $1,482 (22@ $18) + (38@ $17) = $1,042 Req Date July July 11 July 19 July 24 July 30 Total Units Sold 19 29 35 90 Selling Price $69 $69 $71 $71 $71 Total Revenue $1,311 $2,001 $ 213 $2,485 $ 284 $6,294 Watercress Outlet Income Statement (Partial) Sales revenue Cost of goods sold: Beginning inventory Purchases Goods available Ending inventory Cost of goods sold Gross profit $6,294 $ 768 1,756 2,524 (1,042) 1,482 $4,812 Chapter Inventory and Cost of Goods Sold 509 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com (20-30 min.) E6A-8A Req (Journal entries) General Journal Purchases Accounts Payable (thousands) 2,040 2,040 Purchased inventory on account Accounts Receivable Cash Sales Revenue Sold inventory for cash and on account 2,380 1,020 3,400 End-of-period entries to update inventory and record Cost of Goods Sold: a Cost of Goods Sold Inventory (beginning balance) Transfer beginning inventory to COGS 560 b Inventory (ending balance) Cost of Goods Sold Set up ending inventory based on physical count 680 c Cost of Goods Sold Purchases Transfer purchases to COGS 510 Financial Accounting 7/e Solutions Manual 560 680 1,920 1,920 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com (continued) E6A-8A Req Halton Desserts, Inc Income Statement (Partial) Sales revenue Cost of goods sold: Beginning inventory Purchases Goods available Ending inventory Cost of goods sold Gross Profit $3,400 $560 2,040 2,600 (680) 1,920 $1,480 Cost-of-Goods-Sold Model Beginning inventory + Purchases = Goods available - Ending inventory = Cost of goods sold $560 2,040 2,600 680 $1,920 Chapter Inventory and Cost of Goods Sold 511 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com (20-25 min.) P6A-9B Req Inventory (50 units @ $19) 950 Begin Bal Purchases Jan 30 Ending Bal (77 units @ $20) (18 units @ $21 (49 units @ $?) 1,540 Cost of goods sold 378 (96 units @ $?) ? Cost of Goods Sold ? Ending Inventory FIFO (50@ $19) + (46@ $20) = $1,870 (18@ $21) + (31@ $20) = $998 Req Date Jan Jan 11 Jan 19 Jan 24 Jan 31 Total Units Sold 17 33 39 96 Selling Price $71 $71 $73 $73 $73 Total Revenue $1,207 $2,343 $ 146 $2,847 $ 365 $6,908 Championship Outlet Income Statement (Partial) Sales revenue $6,908 Cost of goods sold: Beginning inventory $ 950 Purchases 1,918 Goods available 2,868 Ending inventory (998) Cost of goods sold 1,870 Gross profit $5,038 512 Financial Accounting 7/e Solutions Manual To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com (20-30 min.) E6A-10B Req (Journal entries) General Journal (thousands) Purchases Accounts Payable Purchased inventory on account 2,000 Accounts Receivable Cash Sales Revenue Sold inventory for cash and on account 2,850 950 2,000 3,800 End-of-period entries to update inventory and record Cost of Goods Sold: a Cost of Goods Sold Inventory (beginning balance) Transfer beginning inventory to COGS 530 Inventory (ending balance) Cost of Goods Sold Set up ending inventory based on physical count 650 b c Cost of Goods Sold Purchases Transfer purchases to COGS 530 650 1,880 1,880 Chapter Inventory and Cost of Goods Sold 513 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com (continued) E6A-10B Req Just Desserts, Inc Income Statement (Partial) Sales revenue Cost of goods sold: Beginning inventory Purchases Goods available Ending inventory Cost of goods sold Gross Profit $ 3,800 $ 530 2,000 2,530 (650) 1,880 $ 1,920 Cost-of-Goods-Sold Model Beginning inventory + Purchases = Goods available - Ending inventory = Cost of goods sold 514 Financial Accounting 7/e Solutions Manual 530 2,000 2,530 650 1,880 ... ÷ = $140) Second purchase = $160 ($4,000 ÷ 25 = $160) 426 Financial Accounting 8/e Solutions Manual To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com... inventory before year end Student responses will vary 430 Financial Accounting 8/e Solutions Manual To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com... (1,600,000) Estimated cost of ending inventory………… $ 184,000 Financial Accounting 8/e Solutions Manual To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com