Exam 3

Exercise 9- Tatum Company has four products in its inventory. Information about the December 31, 2021, inventory is as follows:

Determine the carrying value of inventory at December 31, 2021, assuming the lower of cost or net realizable value (LCNRV) rule is applied to individual products.

Assuming that inventory write-downs are common for Tatum Company, record any necessary year-end adjusting entry.

Explanation Write-down of inventory: $300,000-270,000=$30, *If the write-down of inventory was considered substantial and unusual, the debit would have been to a Loss on inventory write-down account.

Product Cost NRV Inventory Value

101 $120,000 $110,000 $100,

102 90,000 110,000 90,

103 60,000 50,000 50,

104 30,000 50,000 30,

$300,000 $270,

No Transaction General Journal Debit Credit

1 1 Cost of Goods Sold 30,

Inventory 30,

Exercise 9- Tatum Company has four products in its inventory. Information about the December 31, 2021, inventory is as follows:

The normal profit is 25% of total cost. 1. Determine the carrying value of inventory at December 31, 2021, assuming the lower of cost or market (LCM) rule is applied to individual products.

Explanation

The inventory value is $257, *NP = 25% of total cost

Product Total Cost Replacement Cost

NRV NRV-NP Market Inventory Value

101 $120,000 $100,000 $100,000 $70,000 $100,000 $100,

102 90,000 85,000 110,000 87,500 87,500 87,

103 60,000 40,000 50,000 40,000 40,000 40,

104 30,000 28,000 50,000 42,500 42,500 30,

Totals $300,000 $257,

Problem 9- Smith Distributors, Inc., supplies ice cream shops with various toppings for making sundaes. On November 17, 2021, a fire resulted in the loss of all of the toppings stored in one section of the warehouse. The company must provide its insurance company with an estimate of the amount of inventory lost. The following information is available from the company's accounting records:

Explanation

Toppings Estimates Cost of Lost Inventory

Fruit $10,

Marshmallow 4,

Chocolate 2,

Exercise 9- Campbell Corporation uses the retail method to value its inventory. The following information is available for the year 2021:

Determine the December 31, 2021, inventory by applying the conventional retail method using the information provided.

Explanation Cost-to-retail percentage: Loading... Estimated ending inventory at cost (70% Loading..,000) = $235,

Cost Retail Cost-to-Retail Ratio

Beginning inventory $190,000 $280,

Purchases 600,000 840,

Freight-in 8,

Net markups 20,

1,140,

Net Markdowns (4,000)

Goods available for sale 798,000 1,136,

Cost-to-retail Percentage 70%

Net Sales (800,000)

Estimated ending inventory at retail 336,

Estimated ending inventory at cost 235,

Estimated ending inventory at cost:

Exercise 9- On January 1, 2021, the Brunswick Hat Company adopted the dollar-value LIFO retail method. The following data are available for 2021:

Calculate the estimated ending inventory and cost of goods sold for 2021 using the information provided.

Explanation

Base year Cost-to-retail percentage: Loading... 2021 Cost-to-retail percentage: Loading...

Ending inventory at retail $150,

Ending inventory at cost $77,

Cost of goods sold $106,

Exercise 9- Canova Corporation adopted the dollar-value LIFO retail method on January 1, 2021. On that date, the cost of the inventory on hand was $15,000 and its retail value was $18,750. Information for 2021 and 2022 is as follows:

Explanation Base year Cost-to-retail percentage: Loading... 2. Calculate the inventory value at the end of 2021 and 2022 using the dollar-value LIFO retail method.

Explanation

Cost-to-retail Percentage 80%

Ending Inventory $16,281 $18,

Sales if no employee discount = $5,280 / 0 = $6, Employee discount = $6,600 − $5,280 = $1,

a. $571, Explanation NRV = $571,000 which is less than cost. Replacement cost is not considered in the valuation.

Estimate the cost of ending inventory for December 31, 2021 a.

Explanation

Estimated Ending Inventory $347,