Question: John Olerud Ltd., a local retailing concern

> Mehta Company traded a used welding machine (cost $9,000, accumulated depreciation $3,000) for office equipment with an estimated fair value of $5,000. Mehta also paid $3,000 cash in the transaction. Prepare the journal entry to record the exchange. (The

> Use the information for Navajo Corporation from BE10-8. In BE10-8 Navajo Corporation traded a used truck (cost $20,000, accumulated depreciation $18,000) for a small computer worth $3,300. Navajo also paid $500 in the transaction. Prepare the journal ent

> Schwartzkopf Co. purchased for $2,200,000 property that included both land and a building to be used in operations. The seller’s book value was $300,000 for the land and $900,000 for the building. By appraisal, the fair value was estimated to be $5

> Navajo Corporation traded a used truck (cost $20,000, accumulated depreciation $18,000) for a small computer worth $3,300. Navajo also paid $500 in the transaction. Prepare the journal entry to record the exchange. (The exchange has commercial substance.

> Fielder Company obtained land by issuing 2,000 shares of its $10 par value common stock. The land was recently appraised at $85,000. The common stock is actively traded at $40 per share. Prepare the journal entry to record the acquisition of the land.

> Mohave Inc. purchased land, building, and equipment from Laguna Corporation for a cash payment of $315,000. The estimated fair values of the assets are land $60,000, building $220,000, and equipment $80,000. At what amounts should each of the three asset

> Garcia Corporation purchased a truck by issuing an $80,000, 4-year, zero-interest-bearing note to Equinox Inc. The market rate of interest for obligations of this nature is 10%. Prepare the journal entry to record the purchase of this truck.

> Use the information for Hanson Company from BE10-2 and BE10-3. Compute avoidable interest for Hanson Company. In BE10-2 Construction began on February 1 and was completed on December 31. Expenditures were $1,800,000 on March 1, $1,200,000 on June

> Hanson Company (see BE10-2) borrowed $1,000,000 on March 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 5-year, $2,000,000 note payable and an 11%, 4-year, $3,500,000 note pa

> Hanson Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,800,000 on March 1, $1,200,000 on June 1, and $3,000,000 on December 31. Compute Hanson’s weighted-average accumulate

> Previn Brothers Inc. purchased land at a price of $27,000. Closing costs were $1,400. An old building was removed at a cost of $10,200. What amount should be recorded as the cost of the land?

> Name the items, in addition to the amount paid to the former owner or contractor, that may properly be included as part of the acquisition cost of the following plant assets. (a) Land. (b) Machinery and equipment. (c) Buildings.

> What are the general rules for how gains or losses on retirement of plant assets should be reported in income?

> Magilke Industries acquired equipment this year to be used in its operations. The equipment was delivered by the suppliers, installed by Magilke, and placed into operation. Some of it was purchased for cash with discounts available for prompt payment. So

> Mickelson Inc. owns land that it purchased on January 1, 2000, for $450,000. At December 31, 2014, its current value is $770,000 as determined by appraisal. At what amount should Mickelson report this asset on its December 31, 2014, balance sheet? Explai

> Garcia Home Improvement Company installs replacement siding, windows, and louvered glass doors for single-family homes and condominium complexes in northern New Jersey and southern New York. The company is in the process of preparing its annual financial

> Remmers Company manufactures desks. Most of the company’s desks are standard models and are sold on the basis of catalog prices. At December 31, 2014, the following finished desks appear in the company’s inventory. The 2014 catalog was in

> John Olerud Ltd., a local retailing concern in the Bronx, New York, has decided to change from the conventional retail inventory method to the LIFO retail method starting on January 1, 2015. The company recomputed its ending inventory for 2014 in accorda

> Connie Chung Corporation adopted the dollar-value LIFO retail inventory method on January 1, 2013. At that time the inventory had a cost of $54,000 and a retail price of $100,000. The following information is available. The price index at January 1, 2

> Refer to the data in IFRS9-8 for Keyser’s Fleece Inc. Prepare the journal entries for (a) The wool harvested in the first six months of 2014, and (b) The wool harvested that is sold for $10,500 in July 2014. In IFRS9-8

> Keyser’s Fleece Inc. holds a drove of sheep. Keyser shears the sheep on a semiannual basis and then sells the harvested wool into the specialty knitting market. Keyser has the following information related to the shearing sheep at January 1, 2014,

> Dover Company began operations in 2014 and determined its ending inventory at cost and at LCNRV at December 31, 2014, and December 31, 2015. This information is presented below. Instructions(a) Prepare the journal entries required at December 31, 2014,

> Riegel Company uses the LCNRV method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2014, consists of products D, E, F, G, H, and I. Relevant per unit data for these products appear below. Using the LCNRV r

> Amiras Corporation began operations on January 1, 2014, with a beginning inventory of $30,100 at cost and $50,000 at retail. The following information relates to 2014. Instructions (a) Assume Amiras decided to adopt the conventional retail method. Com

> Briefly describe the valuation of (a) Biological assets and (b) Agricultural produce.

> Reed Pentak, a finance major, has been following globalization and made the following observation concerning accounting convergence: “I do not see many obstacles concerning development of a single accounting standard for inventories.” Prepare

> LaTour Inc. is based in France and prepares its financial statements in accordance with IFRS. In 2014, it reported cost of goods sold of $578 million and average inventory of $154 million. Briefly discuss how analysis of LaTour’s inventory turnover

> Briefly describe some of the similarities and differences between GAAP and IFRS with respect to the accounting for inventories.

> Prophet Company signed a long-term purchase contract to buy timber from the U.S. Forest Service at $300 per thousand board feet. Under these terms, Prophet must cut and pay $6,000,000 for this timber during the next year. Currently, the market value is $

> Olson Corporation, a retailer and wholesaler of national brand-name household lighting fixtures, purchases its inventories from various suppliers. Instructions (a) (1) What criteria should be used to determine which of Olson’s costs are invento

> Saurez Company, your client, manufactures paint. The company’s president, Maria Saurez, has decided to open a retail store to sell Saurez paint as well as wallpaper and other supplies that would be purchased from other suppliers. She has asked you

> Ogala Corporation purchased a significant amount of raw materials inventory for a new product that it is manufacturing. Ogala uses the lower-of-cost-or-market rule for these raw materials. The replacement cost of the raw materials is above the net realiz

> The market value of Lake Corporation’s inventory has declined below its cost. Sheryl Conan, the controller, wants to use the loss method to write down inventory because it more clearly discloses the decline in market value and does not distort the

> You have been asked by the financial vice president to develop a short presentation on the lower-of-cost-or-market method for inventory purposes. The financial VP needs to explain this method to the president because it appears that a portion of the comp

> Presented below is information related to Langston Hughes Corporation. Instructions Compute the ending inventory under the dollar-value LIFO method at December 31, 2015. The cost-to retail ratio for 2015 was 60%.

> Davenport Department Store converted from the conventional retail method to the LIFO retail method on January 1, 2014, and is now considering converting to the dollar-value LIFO inventory method. During your examination of the financial statements for th

> Diderot Stores Inc., which uses the conventional retail inventory method, wishes to change to the LIFO retail method beginning with the accounting year ending December 31, 2014. Amounts as shown below appear on the store’s books before adjustment.

> Late in 2011, Joan Seceda and four other investors took the chain of Becker Department Stores private, and the company has just completed its third year of operations under the ownership of the investment group. Andrea Selig, controller of Becker Departm

> As of January 1, 2014, Aristotle Inc. installed the retail method of accounting for its merchandise inventory. To prepare the store’s financial statements at June 30, 2014, you obtain the following data. Instructions (a) Prepare a schedule to co

> Fiedler Co. follows the practice of valuing its inventory at the lower-of-cost-or-market. The following information is available from the company’s inventory records as of December 31, 2014. InstructionsGreg Forda is an accounting clerk in the a

> Maddox Specialty Company, a division of Lost World Inc., manufactures three models of gear shift components for bicycles that are sold to bicycle manufacturers, retailers, and catalog outlets. Since beginning operations in 1990, Maddox has used normal ab

> Fuque Inc. uses the retail inventory method to estimate ending inventory for its monthly financial statements. The following data pertain to a single department for the month of October 2015. Instructions (a) Using the conventional retail method, prep

> Presented below is information related to Waveland Inc. InstructionsAssuming that Waveland Inc. uses the conventional retail inventory method, compute the cost of its ending inventory at December 31, 2015.

> The records for the Clothing Department of Sharapova’s Discount Store are summarized below for the month of January. Inventory, January 1: at retail $25,000; at cost $17,000 Purchases in January: at retail $137,000; at cost $82,500 Freight-in: $

> On April 15, 2015, fire damaged the office and warehouse of Stanislaw Corporation. The only accounting record saved was the general ledger, from which the trial balance below was prepared. The following data and information have been gathered.1. The f

> The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at http://annualreport.marksandspencer.com/_assets/downloads/Marks-and-Spencer-Annual-report-and-financial-statements-2012.

> What method(s) might be used in the accounts to record a loss due to a price decline in the inventories? Discuss.

> Remmers Company manufactures desks. Most of the company’s desks are standard models and are sold on the basis of catalog prices. At December 31, 2014, the following finished desks appear in the company’s inventory. The 2014 catalog was in

> Connie Chung Corporation adopted the dollar-value LIFO retail inventory method on January 1, 2013. At that time the inventory had a cost of $54,000 and a retail price of $100,000. The following information is available. The price index at January 1, 2

> Amiras Corporation began operations on January 1, 2014, with a beginning inventory of $30,100 at cost and $50,000 at retail. The following information relates to 2014. Instructions (a) Assume Amiras decided to adopt the conventional retail method. Com

> Presented below is information related to Langston Hughes Corporation. Instructions Compute the ending inventory under the dollar-value LIFO method at December 31, 2015. The cost-to retail ratio for 2015 was 60%.

> You assemble the following information for Seneca Department Store, which computes its inventory under the dollar-value LIFO method. Instructions Compute the cost of the inventory on December 31, 2014, assuming that the inventory at retail is(a) $294,

> Leonard Bernstein Company began operations late in 2013 and adopted the conventional retail inventory method. Because there was no beginning inventory for 2013 and no markdowns during 2013, the ending inventory for 2013 was $14,000 under both the convent

> Helen Keller Company began operations on January 1, 2013, adopting the conventional retail inventory system. None of the company’s merchandise was marked down in 2013 and, because there was no beginning inventory, its ending inventory for 2013 of $

> The financial statements of ConAgra Foods, Inc.’s 2012 annual report disclose the following information. Instructions Compute ConAgra’s(a) Inventory turnover and(b) The average days to sell inventory for 2012 and 2011.

> The records of Ellen’s Boutique report the following data for the month of April. Instructions Compute the ending inventory by the conventional retail inventory method.

> In some instances, accounting principles require a departure from valuing inventories at cost alone. Determine the proper unit inventory price in the following cases.

> Presented below is information related to Ricky Henderson Company. Instructions Compute the inventory by the conventional retail inventory method.

> Presented below is information related to Bobby Engram Company. Instructions(a) Compute the ending inventory at retail.(b) Compute a cost-to-retail percentage (round to two decimals) under the following conditions.(1) Excluding both markups and markdo

> Presented below is information related to Aaron Rodgers Corporation for the current year. Instructions Compute the ending inventory, assuming that(a) Gross profit is 45% of sales;(b) Gross profit is 60% of cost;(c) Gross profit is 35% of sales; and(d)

> Gheorghe Moresan Lumber Company handles three principal lines of merchandise with these varying rates of gross profit on cost. On August 18, a fire destroyed the office, lumber shed, and a considerable portion of the lumber stacked in the yard. To fil

> You are called by Tim Duncan of Spurs Co. on July 16 and asked to prepare a claim for insurance as a result of a theft that took place the night before. You suggest that an inventory be taken immediately. The following data are available. Your client

> Rasheed Wallace Company lost most of its inventory in a fire in December just before the year-end physical inventory was taken. The corporation’s books disclosed the following. Merchandise with a selling price of $21,000 remained undamaged after

> Tim Legler requires an estimate of the cost of goods lost by fire on March 9. Merchandise on hand on January 1 was $38,000. Purchases since January 1 were $72,000; freight-in, $3,400; purchase returns and allowances, $2,400. Sales are made at 331/3% abov

> Mark Price Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May. Instructions (a) Compute the estimated inventory at May 31, assuming that the gross profit is 30

> Each of the following gross profit percentages is expressed in terms of cost. 1. 20%. 2. 25%. 3. 331/3%. 4. 50%. Instructions Indicate the gross profit percentage in terms of sales for each of the above.

> At December 31, 2014, Indigo Girls Company has outstanding non-cancelable purchase commitments for 36,000 gallons, at $3.00 per gallon, of raw material to be used in its manufacturing process. The company prices its raw material inventory at cost or mark

> What approaches may be employed in applying the lower-of-cost-or-market procedure? Which approach is normally used and why?

> Marvin Gaye Company has been having difficulty obtaining key raw materials for its manufacturing process. The company therefore signed a long-term non-cancelable purchase commitment with its largest supplier of this raw material on November 30, 2014, at

> Phil Collins Realty Corporation purchased a tract of unimproved land for $55,000. This land was improved and subdivided into building lots at an additional cost of $34,460. These building lots were all of the same size but owing to differences in locatio

> Winans Company uses the lower-of-cost-or-market method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2013, included product X. Relevant per-unit data for product X appear below. There were 1,000 units of p

> Presented below is information related to Candlebox Enterprises. Instructions(a) From the information, prepare (as far as the data permit) monthly income statements in columnar form for February, March, and April. The inventory is to be shown in the s

> Corrs Company began operations in 2013 and determined its ending inventory at cost and at lower-of-cost-or-market at December 31, 2013, and December 31, 2014. This information is presented below. Instructions (a) Prepare the journal entries required a

> Michael Bolton Company follows the practice of pricing its inventory at the lower-of-cost-or-market, on an individual-item basis. Instructions From the information above, determine the amount of Bolton Company inventory.

> Smashing Pumpkins Company uses the lower-of-cost-or-market method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2014, consists of products D, E, F, G, H, and I. Relevant per-unit data for these products appea

> The inventory of 3T Company on December 31, 2014, consists of the following items. Instructions (a) Determine the inventory as of December 31, 2014, by the lower-of-cost-or-market method, applying this method directly to each item.(b) Determine the in

> Use the information for Boyne Inc. from BE9-8, and assume the price level increased from 100 at the beginning of the year to 115 at year-end. Compute ending inventory at cost using the dollar-value LIFO retail method. In BE9-8 Boyne Inc. had beginning in

> Why are inventories valued at the lower-of-cost-or market? What are the arguments against the use of the LCM method of valuing inventories?

> Use the information for Boyne Inc. from BE9-8. Compute ending inventory at cost using the LIFO retail method. In BE9-8 Boyne Inc. had beginning inventory of $12,000 at cost and $20,000 at retail. Net purchases were $120,000 at cost and $170,000 at retail

> In its 2012 annual report, Gap Inc. reported inventory of $1,615 million on January 25, 2012, and $1,620 million on January 29, 2011, cost of sales of $9,275 million for fiscal year 2012, and net sales of $14,549 million. Compute Gap’s inventory tu

> Boyne Inc. had beginning inventory of $12,000 at cost and $20,000 at retail. Net purchases were $120,000 at cost and $170,000 at retail. Net markups were $10,000; net markdowns were $7,000; and sales revenue was $147,000. Compute ending inventory at cost

> Fosbre Corporation’s April 30 inventory was destroyed by fire. January 1 inventory was $150,000, and purchases for January through April totaled $500,000. Sales revenue for the same period were $700,000. Fosbre’s normal gross profit percentag

> Use the information for Kemper Company from BE9-5. In 2015, Kemper paid $1,000,000 to obtain the raw materials which were worth $950,000. Prepare the entry to record the purchase. In BE9-5 Kemper Company signed a long-term noncancelable purchase commitme

> Kemper Company signed a long-term non-cancelable purchase commitment with a major supplier to purchase raw materials in 2015 at a cost of $1,000,000. At December 31, 2014, the raw materials to be purchased have a market value of $950,000. Prepare any nec

> Bell, Inc. buys 1,000 computer game CDs from a distributor who is discontinuing those games. The purchase price for the lot is $8,000. Bell will group the CDs into three price categories for resale, as indicated below. Determine the cost per CD for ea

> Kumar Inc. uses a perpetual inventory system. At January 1, 2014, inventory was $214,000 at both cost and market value. At December 31, 2014, the inventory was $286,000 at cost and $265,000 at market value. Prepare the necessary December 31 entry under

> Floyd Corporation has the following four items in its ending inventory. Determine the final lower-of-cost-or-market inventory value for each item.

> Presented below is information related to Rembrandt Inc.’s inventory. Determine the following:(a) The two limits to market value (i.e., the ceiling and the floor) that should be used in the lower-of-cost-or-market computation for skis,(b) The co

> Explain the rationale for the ceiling and floor in the lower of cost or market method of valuing inventories.

> Of what significance is inventory turnover to a retail store?

> Deere and Company reported inventory in its balance sheet as follows. Inventories $1,999,100,000 What additional disclosures might be necessary to present the inventory fairly?

> (a) Determine the ending inventory under the conventional retail method for the furniture department of Mayron Department Stores from the following data. (b) If the results of a physical inventory indicated an inventory at retail of $295,000, what inf

> The conventional retail inventory method yields results that are essentially the same as those yielded by the lower of cost-or-market method. Explain. Prepare an illustration of how the retail inventory method reduces inventory to market.

> What conditions must exist for the retail inventory method to provide valid results?

> A fire destroys all of the merchandise of Assante Company on February 10, 2014. Presented below is information compiled up to the date of the fire. What is the approximate inventory on February 10, 2014?

> Adriana Co., with annual net sales of $5 million, maintains a markup of 25% based on cost. Adriana’s expenses average 15% of net sales. What is Adriana’s gross profit and net profit in dollars?

> Distinguish between gross profit as a percentage of cost and gross profit as a percentage of sales price. Convert the following gross profit percentages based on cost to gross profit percentages based on sales price: 25% and 331/3%. Convert the fol

> What are the major uses of the gross profit method?

> What are reversing entries, and why are they used?  

> Why should caution be exercised in the use of the net income figure derived in an income statement? What are the objectives of generally accepted accounting principles in their application to the income statement?