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# Solution Manual for INTERMEDIATE ACCOUNTING 7TH EDITION SPICELAND

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• ISBN-10 ‏ : ‎ 1259187853
• ISBN-13 ‏ : ‎ 978-1259187858

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SKU:tb1002212

## Solution Manual for INTERMEDIATE ACCOUNTING 7TH EDITION SPICELAND

EXERCISES
Exercise 9-1
Requirement 1

(1) (2) (3) (4) (5)

Product

RC Ceiling

NRV Floor

NRV-NP
(NP=
20%
of cost)

Designated Market Value
[Middle value of (1)-(3)]

Cost

Inventory Value
[Lower of (4) or (5)]

Gloves \$330,000 \$300,000 \$228,000 \$300,000 \$360,000 \$300,000

Bats 240,000 320,000 268,000 268,000 260,000 260,000

Balls 110,000 125,000 95,000 110,000 150,000 110,000

Uniforms 560,000 950,000 830,000 830,000 600,000 600,000
Totals \$1,370,000 \$1,270,000

The inventory value is \$1,270,000.
Requirement 2
Loss from write-down of inventory: \$1,370,000 – 1,270,000 = \$100,000
Exercise 9-2

Merchandise inventory, January 1, 2013 \$ 4,500,000
Purchases 14,500,000
Freight-in 1,000,000
Cost of goods available for sale 20,000,000
Less: Cost of goods sold:
Sales \$23,000,000
Less: Estimated gross profit of 40% (9,200,000) (13,800,000)
Estimated loss from fire \$ 6,200,000

Exercise 9-3

Cost Retail
Beginning inventory \$40,000 \$60,000
Plus: Net purchases 28,250 37,000
Net markups 2,000
Less: Net markdowns ______ (1,500)
Goods available for sale 68,250 97,500

\$68,250
Cost-to-retail percentage: = 70%
\$97,500

Less: Net sales (45,000)
Estimated ending inventory at retail \$52,500
Estimated ending inventory at cost (70% x \$52,500) (36,750)
Estimated cost of goods sold \$31,500

Exercise 9-4

Cost Retail
Beginning inventory \$ 180,000 \$ 300,000
Plus: Purchases 1,479,000 2,430,000
Freight-in 30,000
Less: Purchase returns (60,000) (105,000)
Plus: Net markups 90,000
2,715,000
\$1,629,000
Cost-to-retail percentage: = 60%
\$2,715,000
Less: Net markdowns _______ (45,000)
Goods available for sale 1,629,000 2,670,000
Less:
Normal spoilage (63,000)
Net sales (2,340,000)

Estimated ending inventory at retail \$ 267,000
Estimated ending inventory at cost (60% x \$267,000) (160,200)
Estimated cost of goods sold \$1,468,800

Exercise 9-5

Cost Retail
Beginning inventory \$213,840 \$ 396,000
Plus: Net purchases 360,000 765,000
Net markups 18,000
Less: Net markdowns _______ (33,000)
Goods available for sale (excluding beginning inventory) 360,000 750,000
Goods available for sale (including beginning inventory) 573,840 1,146,000

\$213,840
Base year cost-to-retail percentage: = 54%
\$396,000

\$360,000
2013 cost-to-retail percentage: = 48%
\$750,000

Less: Net sales (690,000)
Estimated ending inventory at current year retail prices \$456,000

Estimated ending inventory at cost (below) (238,838)
Estimated cost of goods sold \$335,002
___________________________________________________________________________

Step 1 Step 2 Step 3
Ending Ending Inventory Inventory
Inventory Inventory Layers Layers
at Year-end at Base Year at Base Year Converted to
Retail Prices Retail Prices Retail Prices Cost

\$456,000
\$456,000 = \$447,059 \$396,000 (base) x 1.00 x 54% = \$213,840
(above) 1.02 51,059 (2013) x 1.02 x 48% = 24,998

Total ending inventory at dollar-value LIFO retail cost …………………. \$238,838

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