Lance-Hefner Specialty Shoppes decided to use the dollar-value LIFO retail method to value its inventory

E 9-21 Dollar-value LIFO retail

Lance-Hefner Specialty Shoppes decided to use the dollar-value LIFO retail method to value its inventory. Accounting records provides the following information:

Merchandise Inventory, Jan 1, 2011 Cost 160,000 Retail 250,000
Net Purchases Cost 350,200 Retail 510,000
Net Markups Retail 7,000
Net Markdowns Retail 2,000
Net Sales Retail 380,000

Pertinent retail price indexes are as follows
January 1, 2011 1.00
December 31, 2011 1.10

Required:
Determine ending inventory and cost of goods sold.

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The management of Clare Co. asks your help in determining the comparative effects of the FIFO and LIFO inventory cost flow methods

P6-7B The management of Clare Co. asks your help in determining the comparative effects of the FIFO and LIFO inventory cost flow methods. For 2011, the accounting records show the following data.

Inventory, January 1 (10,000 units) $ 45,000
Cost of 100,000 units purchased 532,000
Selling price of 80,000 units sold 700,000
Operating expenses 140,000

Units purchased consisted of 35,000 units at $5.10 on May 10; 35,000 units at $5.30 on August 15; and 30,000 units at $5.60 on November 20. Income taxes are 30%.

Instructions
(a) Prepare comparative condensed income statements for 2011 under FIFO and LIFO. (Show computations of ending inventory.)
(b) Answer the following questions for management.
(1) Which inventory cost flow method produces the most meaningful inventory amount for the balance sheet? Why?
(2) Which inventory cost flow method produces the most meaningful net income? Why?
(3) Which inventory cost flow method is most likely to approximate actual physical flow of the goods? Why?
(4) How much additional cash will be available for management under LIFO than under
FIFO? Why?
(5) How much of the gross profit under FIFO is illusory in comparison with the gross profit under LIFO?


Click here for the solution: The management of Clare Co. asks your help in determining the comparative effects of the FIFO and LIFO inventory cost flow methods

You assemble the following information for Dillon Department Store, which computes its inventory under the dollar-value LIFO method

E9-24 (Dollar-Value LIFO Retail) You assemble the following information for Dillon Department Store, which computes its inventory under the dollar-value LIFO method.

Cost Retail
Inventory on January 1, 2010 $222,000 $300,000
Purchases 364,800 480,000
Increase in price level for year 9%

Instructions
Compute the cost of the inventory on December 31, 2010, assuming that the inventory at retail is (a) $294,300 and (b) $359,700.

Click here for the solution: You assemble the following information for Dillon Department Store, which computes its inventory under the dollar-value LIFO method

Harrisburg Company is considering changing its inventory valuation method from FIFO to LIFO because of the potential tax savings

CA8-10 (FIFO and LIFO) Harrisburg Company is considering changing its inventory valuation method from FIFO to LIFO because of the potential tax savings. However, the management wishes to consider all of the effects on the company, including its reported performance, before making the final decision.

The inventory account, currently valued on the FIFO basis, consists of 1,000,000 units at $8 per unit on January 1, 2010. There are 1,000,000 shares of common stock outstanding as of January 1, 2010, and the cash balance is $400,000.

The company has made the following forecasts for the period 2010–2012.

Instructions
(a) Prepare a schedule that illustrates and compares the following data for Harrisburg Company under the FIFO and the LIFO inventory method for 2010–2012. Assume the company would begin LIFO at the beginning of 2010.
1. Year-end inventory balances.
2. Annual net income after taxes.
3. Earnings per share.
4. Cash balance.

Assume all sales are collected in the year of sale and all purchases, operating expenses, and taxes are paid during the year incurred.

(b) Using the data above, your answer to (a), and any additional issues you believe need to be considered, prepare a report that recommends whether or not Harrisburg Company should change to the LIFO inventory method. Support your conclusions with appropriate arguments.

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On January 1, 2011, the Haskins Company adopted the dollar-value LIFO method for its one inventory pool

E 8-22 On January 1, 2011, the Haskins Company adopted the dollar-value LIFO method for its one inventory pool. The pool's value on this date was $660,000. The 2011 and 2012 ending inventory valued at year-end costs were $690,000 and $760,000, respectively. The appropriate cost indexes are 1.04 for 2011 and 1.08 for 2012.

Required:

Calculate the inventory value at the end of 2011 and 2012 using the dollar-value LIFO method.

Click here for the solution: On January 1, 2011, the Haskins Company adopted the dollar-value LIFO method for its one inventory pool

The management of Utley Inc. asks your help in determining the comparative effects of the FIFO and LIFO inventory cost flow methods

P6-7A The management of Utley Inc. asks your help in determining the comparative effects of the FIFO and LIFO inventory cost flow methods. For 2008 the accounting records show these data.

Inventory, January 1 (10,000 Units) $35,000
Cost of 120,000 units purchased 504,500
Selling price of 100,000 units sold 665,000
Operating expenses 130,000

Units purchased consisted of 35,000 units at $4.00 on May 10; 60,000 units at $4.20 on August 15; and 25,000 units at $4.50 on November 20. Income taxes are 28%.

Instructions:
a. Prepare comparative condensed income statements for 2008 under FIFO and LIFO (show computations of ending inventory.)
b. Answer the following questions for management in the form of a business letter.
1. Which inventory cost flow method produces the most meaningful inventory amount for the balance sheet? Why?
2. Which inventory cost flow method produces the most meaningful net income? Why?
3. Which inventory cost flow method is most likely to approximate the actual physical flow of the goods? Why?
4. How much more cash will be available for management under LIFO than under FIFO? Why?
5. How much of the gross profit under FIFO is illusionary in comparison with the gross profit under LIFO?

Click here for the solution: The management of Utley Inc. asks your help in determining the comparative effects of the FIFO and LIFO inventory cost flow methods

State how each of the following items is reflected in the financial statements

State how each of the following items is reflected in the financial statements.

1.Change from FIFO to LIFO method for inventory valuation purposes.

2.Charge for failure to record depreciation in a previous period.

3.Litigation won in current year, related to prior period.

4.Change in the realizability of certain receivables.

5.Writeoff of receivables.

6.Change from the percentage-of-completion to the completed-contract method for reporting net income.

Click here for the solution: State how each of the following items is reflected in the financial statements