Solution Manual for INTERMEDIATE ACCOUNTING 7TH EDITION SPICELAND

Solution Manual for INTERMEDIATE ACCOUNTING 7TH EDITION SPICELAND

Chapter 9 Inventories: Additional Issues

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