會計學原理financial-accounting-by-robert-libby第八版-第七章-答案

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Chapter07-ReportingandInterpretingCostofGoodsSoldandInventory

Chapter7

ReportingandInterpretingCostofGoodsSoldandInventory

ANSWERSTOQUESTIONS

1.Inventoryoftenisoneofthelargestamountslistedunderassetsonthebalancesheetwhichmeansthatitrepresentsasignificantamountoftheresourcesavailabletothebusiness.Theinventorymaybeexcessiveinamount,whichisaneedlesswasteofresources;alternativelyitmaybetoolow,whichmayresultinlostsales.Therefore,forinternalusersinventorycontrolisveryimportant.Ontheincomestatement,inventoryexertsadirectimpactontheamountofincome.Therefore,statementusersareinterestedparticularlyintheamountofthiseffectandthewayinwhichinventoryismeasured.Becauseofitsimpactonboththebalancesheetandtheincomestatement,itisofparticularinteresttoallstatementusers.

2.Fundamentally,inventoryshouldincludethoseitems,andonlythoseitems,legallyownedbythebusiness.Thatis,inventoryshouldincludeallgoodsthatthecompanyowns,regardlessoftheirparticularlocationatthetime.

3.Thecostprinciplegovernsthemeasurementoftheendinginventoryamount.Theendinginventoryisdeterminedinunitsandthecostofeachunitisappliedtothatnumber.Underthecostprinciple,theunitcostisthesumofallcostsincurredinobtainingoneunitoftheinventoryiteminitspresentstate.

4.Goodsavailableforsaleisthesumofthebeginninginventoryandtheamountofgoodspurchasedduringtheperiod.Costofgoodssoldistheamountofgoodsavailableforsalelesstheendinginventory.

5.Beginninginventoryisthestockofgoodsonhand(ininventory)atthestartoftheaccountingperiod.Endinginventoryisthestockofgoodsonhand(ininventory)attheendoftheaccountingperiod.Theendinginventoryofoneperiodautomaticallybecomesthebeginninginventoryofthenextperiod.

6.(a)Averagecost–Thisinventorycostingmethodinaperiodicinventorysystemisbasedonaweighted-averagecostfortheentireperiod.Attheendoftheaccountingperiodtheaveragecostiscomputedbydividingthegoodsavailableforsaleinunitsintothecostofgoodsavailableforsaleindollars.Thecomputedunitcostthenisusedtodeterminethecostofgoodssoldfortheperiodbymultiplyingtheunitssoldbythisaverageunit

7-1

FinancialAccounting,8/e

?2023byMcGraw-HillGlobalEducationHoldings,LLC.Thisisproprietarymaterialsolelyforauthorizedinstructoruse.Notauthorizedforsaleordistributioninanymanner.Thisdocumentmaynotbecopied,scanned,duplicated,forwarded,distributed,orpostedonawebsite,inwholeorpart.

Chapter07-ReportingandInterpretingCostofGoodsSoldandInventory

cost.Similarly,theendinginventoryfortheperiodisdeterminedbymultiplyingthisaverageunitcostbythenumberofunitsonhand.

(b)FIFO–Thisinventorycostingmethodviewsthefirstunitspurchasedasthe

firstunitssold.Underthismethodcostofgoodssoldiscostedattheoldestunitcosts,andtheendinginventoryiscostedatthenewestunitcosts.

(c)LIFO–Thisinventorycostingmethodassumesthatthelastunitspurchasedarethefirstunitssold.Underthismethodcostofgoodssoldiscostedatthenewestunitcostsandtheendinginventoryiscostedattheoldestunitcosts.

(d)Specificidentification–Thisinventorycostingmethodrequiresthateachiteminthebeginninginventoryandeachitempurchasedduringtheperiodbeidentifiedspecificallysothatitsunitcostcanbedeterminedbyidentifyingthespecificitemsold.Thismethodusuallyrequiresthateachitembemarked,oftenwithacodethatindicatesitscost.Whenitissold,thatunitcostisthecostofgoodssoldamount.Itoftenischaracterizedasapick-and-choosemethod.Whentheendinginventoryistaken,thespecificitemsonhand,valuedatthecostindicatedoneachofthem,istheendinginventoryamount.

7.Thespecificidentificationmethodofinventorycostingissubjecttomanipulation.Manipulationispossiblebecauseonecan,atthetimeofeachsale,select(pickandchoose)fromtheshelftheitemthathasthehighestorthelowest(orsomeother)unitcostwithnoparticularrationaleforthechoice.Therationalemaybethatitisdesiredtoinfluence,byarbitrarychoice,boththeamountofincomeandtheamountofendinginventorytobereportedonthefinancialstatements.Toillustrate,assumeitemAisstockedandthreeareontheshelf.Onecost$100;thesecondonecost$115;andthethirdcost$125.Nowassumethatoneunitissoldfor$200.Ifitisassumedarbitrarilythatthefirstunitissold,thegrossprofitwillbe$100;ifthesecondunitisselected,thegrossprofitwillbe$85;oralternatively,ifthethirdunitisselected,thegrossprofitwillbe$75.Thus,theamountofgrossprofit(andincome)willvarysignificantlydependinguponwhichoneofthethreeisselectedarbitrarilyfromtheshelfforthisparticularsale.Thisassumesthatallthreeitemsareidenticalineveryrespectexceptfortheirunitcosts.Ofcourse,theselectionofadifferentunitcost,inthiscase,alsowillinfluencetheendinginventoryforthetworemainingitems.

8.LIFOandFIFOhaveoppositeeffectsontheinventoryamountreportedunderassetsonthebalancesheet.Theendinginventoryisbaseduponeithertheoldestunitcostorthenewestunitcost,dependinguponwhichmethodisused.UnderFIFO,theendinginventoryiscostedatthenewestunitcosts,andunderLIFO,theendinginventoryiscostedattheoldestunitcosts.Therefore,whenpricesarerising,theendinginventoryreportedonthebalancesheetwillbehigherunderFIFOthanunderLIFO.Conversely,whenpricesarefallingthe

7-2SolutionsManual

Chapter07-ReportingandInterpretingCostofGoodsSoldandInventory

endinginventoryonthebalancesheetwillbehigherunderLIFOthanunder

FIFO.

9.LIFOversusFIFOwillaffecttheincomestatementintwoways:(1)theamountofcostofgoodssoldand(2)income.Whenthepricesarerising,FIFOwillgivealowercostofgoodssoldamountandhenceahigherincomeamountthanwillLIFO.Incontrast,whenpricesarefalling,FIFOwillgiveahighercostofgoodssoldamountand,asaresult,alowerincomeamount.

10.Whenpricesarerising,LIFOcausesalowertaxableincomethandoesFIFO.Therefore,whenpricesarerising,incometaxislessunderLIFOthanFIFO.Alowertaxbillsavescash(reducescashoutflowforincometax).ThetotalamountofcashsavedisthedifferencebetweenLIFOandFIFOinventoryamountsmultipliedbytheincometaxrate.

11.LCMisappliedwhenmarket(definedascurrentreplacementcost)islowerthanthecostofunitsonhand.Theendinginventoryisvaluedatmarket(lower),which(a)reducesnetincomeand(b)reducestheinventoryamountreportedonthebalancesheet.TheeffectofapplyingLCMistoincludetheholdinglossontheincomestatement(asapartofCGS)intheperiodinwhichthereplacementcostdropsbelowcostratherthanintheperiodofactualsale.

12.Whenaperpetualinventorysystemisused,theunitcostmustbeknownforeachitemsoldatthedateofeachsalebecauseatthattimetwothingshappen:(a)theunitssoldandtheircostsareremovedfromtheperpetualinventoryrecordandthenewinventorybalanceisdetermined;(b)thecostofgoodssoldisdeterminedfromtheperpetualinventoryrecordandanentryintheaccountsismadeasadebittoCostofGoodsSoldandacredittoInventory.Incontrast,whenaperiodicinventorysystemisusedtheunitcostneednotbeknownatthedateofeachsale.Infact,theperiodicsystemisdesignedsothatcostofgoodssoldforeachsaleisnotknownatthetimeofsale.Attheendoftheperiod,undertheperiodicinventorysystem,costofgoodssoldisdeterminedbyaddingthebeginninginventorytothetotalgoodspurchasedfortheperiodandsubtractingfromthattotaltheendinginventoryamount.Theendinginventoryamountisdeterminedbymeansofaphysicalinventorycountofthegoodsremainingonhandandwiththeunitsvaluedonaunitcostbasisinaccordancewiththecostprinciple(byapplyinganappropriateinventorycostingmethod).

ANSWERSTOMULTIPLECHOICE

1.c)

5.c)

6.c)

10.a)

7-3

FinancialAccounting,8/e

Chapter07-ReportingandInterpretingCostofGoodsSoldandInventory

Authors'RecommendedSolutionTime

(Timeinminutes)

Mini-exercises

Exercises

Problems

Alternate

Problems

CasesandProjects

No.

Time

No.

Time

No.

Time

No.

Time

No.

Time

ContinuingCase

*Duetothenatureofthesecasesandprojects,itisverydifficulttoestimatetheamountoftimestudentswillneedtocompletetheassignment.Aswithanyopen-endedproject,itispossibleforstudentstodevotealargeamountoftimetotheseassignments.Whilestudentsoftenbenefitfromtheextraeffort,wefindthatsomebecomefrustratedbytheperceiveddifficultyofthetask.Youcanreducestudentfrustrationandanxietybymakingyourexpectationsclear.Forexample,whenourgoalistosharpenresearchskills,wedevoteclasstimetodiscussingresearchstrategies.Whenwewantthestudentstofocusonarealaccountingissue,weoffersuggestionsaboutpossiblecompaniesorindustries.

7-4

SolutionsManual

Chapter07-ReportingandInterpretingCostofGoodsSoldandInventory

MINI-EXERCISES

M7–1.

TypeofInventory

Workinprocess

Finishedgoods

Merchandise

Rawmaterials

TypeofBusiness

Manufacturing

Merchandising

M7–2.

Torecordthepurchaseof90newshirtsinaccordancewiththecostprinciple(perpetualinventorysystem):

Inventory(+A)...............................................................

Cash(A)...........................................................

2,150

Cost:$1,800+$185+$165=$2,150.

The$108interestexpenseisnotapropercostofthemerchandise;itisrecordedasprepaidinterestexpenseandlaterasinterestexpense.

M7–3.

a.Wagesoffactoryworkers

b.Costsofrawmaterialspurchased

c.Salessalaries

d.Heat,light,andpowerforthefactorybuilding

e.Heat,light,andpowerfortheheadquartersofficebuilding

(1)Partof

inventory

(2)Expenseasincurred

7-5

FinancialAccounting,8/e

Chapter07-ReportingandInterpretingCostofGoodsSoldandInventory

M7–4.

Computation:Simplyrearrangethebasicinventorymodel(BI+P–EI=CGS):

Costofgoodssold..................................................

+Endinginventory.................................................

–Beginninginventory................................................

Purchases..............................................................

$11,042million

2,916million

(3,213)million

$10,745million

M7–5.

(a)

(b)

Decliningcosts

Highestnetincome

HighestinventoryRisingcosts

HighestnetincomeHighestinventory

LIFO LIFO

FIFO FIFO

M7–6.

LIFOisoftenselectedwhencostsarerisingbecauseitreducesthecompany’staxliabilitywhichincreasescashandbenefitsshareholders.However,italsoreducesreportednetincome.

M7–7.

QuantityCostperReplacementLowerofCostReportedon

ItemCostperItemorMarketBalanceSheet

ItemA

ItemB

Total

M7–8.

+(a) NE(b) +(c)

7-6

$110

$100

$10060

70x$100=$7,000

30x$60=$1,800$8,800

Partsinventorydelivereddailybysuppliersinsteadofweekly.Extendpaymentsforinventorypurchasesfrom15daysto30days.Shortenproductionprocessfrom10daysto8days.

SolutionsManual

Chapter07-ReportingandInterpretingCostofGoodsSoldandInventory

M7–9.

Understatementofthe2023endinginventoryby$50,000caused2023pretaxincometobeunderstatedand2023pretaxincometobeoverstatedbythesameamount.Overstatementofthe2023endinginventorywouldhavetheoppositeeffect;thatis,2023pretaxincomewouldbeoverstatedby$50,000and2023pretaxincomeunderstatedby$50,000.Totalpretaxincomeforthetwoyearscombinedwouldbecorrect.

7-7

FinancialAccounting,8/e

CaseC

Chapter07-ReportingandInterpretingCostofGoodsSoldandInventory

EXERCISES

E7–1

ItemAmountExplanation

Endinginventory(physicalcounton$34,500Perphysicalinventory.

December31,2023)

Goodspurchasedandintransit

Goodspurchasedandintransit,F.O.B.shippingpoint,areownedbythepurchaser.

Samplesheldbyacustomerontrialarestillownedbythevendor;nosaleortransferofownershiphasoccurred.

Goodsshippedtocustomers,

+700

Samplesoutontrialtocustomer

+1,800

Goodsintransittocustomer

F.O.B.shippingpoint,areownedbythecustomerbecauseownershippassedwhentheyweredeliveredtothetransportationcompany.Theinventorycorrectlyexcludedtheseitems.

+1,500

Goodssoldandintransit

destination,areownedbytheseller untiltheyreachdestination.

Goodssoldandintransit,F.O.B.

Correctinventory,December31,2023$38,500

E7–2.

(Italicsformissingamountsonly.)

CaseA

CaseB

Netsalesrevenue...........

Beginninginventory........

Purchases..................

Goodsavailableforsale.

Endinginventory.............

Costofgoodssold..........

Grossprofit..................

Expenses..................

Pretaxincome.................

7-8

$7,500$4,800

$5,000

$11,200$7,000$4,000

4,5008,0509,500

15,70015,05013,500

9,00011,0509,300

6,7004,000

4,200

800

300

800

1,000

800

700

$500$(200)$100

SolutionsManual

Chapter07-ReportingandInterpretingCostofGoodsSoldandInventory

E7–3.

(Italicsandboldformissingamountsonly.)

Case

SalesRevenue

Beg.Inven-

tory

Pur-

chases

Total

Avail-

able

EndingInventory

Costof

GoodsSold

GrossProfit

Ex-

penses

Pretax

Income

or(Loss)

$650

1,100

600

800

1,000

$100

200

150

200

$700

900

350

550

900

$8001,100 500700

1,100

$500

300

600

$300

800

200

400

500

$350

300

400

500

$200

150

100

200

550

$150

150

300

200

(50)

E7–4.

Computations:

Simplyrearrangethecostofgoodssoldequation

BI+P–EI=CGS

P=CGS–BI+EI

Costofgoodssold....................................$1,639,188,000

–Beginninginventory..................................(385,857,000)

+Endinginventory.......................................569,818,000

Purchases.................................................$1,823,149,000

7-9

FinancialAccounting,8/e

Chapter07-ReportingandInterpretingCostofGoodsSoldandInventory

E7-5

Costofgoodssold:

Beginninginventory($5).............

Purchases(March21)($6).........

(August1)($8)..........

Goodsavailableforsale...

Endinginventory*........................

Costofgoodssold**.........

Units

2,000

5,000

3,000

10,000

4,000

6,000

FIFO

$10,000

30,000

24,000

64,000

30,000

$34,000

LIFO

$10,000

30,000

24,000

64,000

22,000

$42,000

Average

Cost

$10,000

30,000

24,000

64,000

25,600

$38,400

*Endinginventorycomputations:

FIFO:(3,000units@$8)+(1,000units@$6)=$30,000.

LIFO:(2,000units@$5)+(2,000units@$6)=$22,000.

Average:[(2,000units@$5)+(5,000units@$6)+(3,000units@$8)]=

$64,000÷10,000units=$6.40perunit.

4,000units@$6.40=$25,600.

**Costofgoodssoldcomputations:

FIFO:(2,000units@$5)+(4,000units@$6)=$34,000.

LIFO:(3,000units@$8)+(3,000units@$6)=$42,000.

Average:[(2,000units@$5)+(5,000units@$6)+(3,000units@$8)]=

$64,000÷10,000units=$6.40perunit.

6,000units@$6.40=$38,400.

7-10

SolutionsManual

Chapter07-ReportingandInterpretingCostofGoodsSoldandInventory

E7–6

Costofgoodssold:

Beginninginventory($5).............

Purchases(March21)($4).........

(August1)($2)..........

Goodsavailableforsale...

Endinginventory*........................

Costofgoodssold............

Units

2,000

6,000

4,000

12,000

3,000

9,000

FIFO

$10,000

24,000

8,000

42,000

6,000

$36,000

LIFO

$10,000

24,000

8,000

42,000

14,000

$28,000

Average

Cost

$10,000

24,000

8,000

42,000

10,500

$31,500

*Endinginventorycomputations:

FIFO:(3,000units@$2)=$6,000.

LIFO:(2,000units@$5)+(1,000units@$4)=$14,000.

Average:[(2,000units@$5)+(6,000units@$4)+(4,000units@$2)]=$42,000÷12,000units=$3.50perunit.

3,000units@$3.50=$10,500.

**Costofgoodssoldcomputations:

FIFO:(2,000units@$5)+(6,000units@$4)+(1,000units@$2)=$36,000.

LIFO:(4,000units@$2)+(5,000units@$4)=$28,000.

Average:[(2,000units@$5)+(6,000units@$4)+(4,000units@$2)]=

$42,000÷12,000units=$3.50perunit.

9,000units@$3.50=$31,500.

7-11

FinancialAccounting,8/e

Chapter07-ReportingandInterpretingCostofGoodsSoldandInventory

E7–7.

Req.1

BROADHEADCOMPANY

IncomeStatement

FortheYearEndedDecember31,2023

CaseA

FIFO

CaseB

LIFO

Salesrevenue1...............................

Costofgoodssold:

Beginninginventory................

Purchases...............................

Goodsavailableforsale2

Endinginventory3...................

Costofgoodssold4.........

Grossprofit..................................

Expenses..................................

Pretaxincome.................................

$27,000 195,000 222,000 125,000

$500,000

97,000 403,000 195,000$208,000

$500,000

$27,000

195,000

222,000

87,000

135,000 365,000 195,000$170,000

Computations:

(1)Sales:(10,000units@$50)=$500,000

(2)Goodsavailableforsale(forbothcases):

Beginninginventory

Purchase,April11,2023

Purchase,June1,2023

Goodsavailableforsale

Units

3,000

9,000

7,000

19,000

UnitCost

TotalCost

$27,000

90,000

105,000

$222,000

(3)Endinginventory(19,000available–10,000unitssold=9,000units):

CaseA

CaseB

FIFO:

(7,000units@$15=$105,000)+

(2,000units@$10=$20,000)=$125,000.

LIFO:

(3,000units@$9=$27,000)+

(6,000units@$10=$60,000)=$87,000.

7-12

SolutionsManual

Chapter07-ReportingandInterpretingCostofGoodsSoldandInventory

E7–7.(continued)

Req.1(continued)

(4)Costofgoodssold(10,000unitssold):

CaseA

CaseB

Req.2

FIFO:

(3,000units@$9=$27,000)+

(7,000units@$10=$70,000)=$97,000

LIFO:

(7,000units@$15=$105,000)+

(3,000units@$10=$30,000)=$135,000

ComparisonofAmounts

CaseA

FIFO

CaseB

LIFO

PretaxIncome$208,000$170,000

Difference$38,000

EndingInventory125,00087,000

Difference38,000

Theabovetabulationdemonstratesthatthepretaxincomedifferencebetweenthetwocasesisexactlythesameastheinventorydifference.Differencesininventoryhaveadollar-for-dollareffectonpretaxincome.

Req.3

LIFOmaybepreferredforincometaxpurposesbecauseitreportslesstaxableincome(whenpricesarerising)andhence(a)reducesincometaxand(b)asaresultreducescashoutflowsfortheperiod.

7-13

FinancialAccounting,8/e

Chapter07-ReportingandInterpretingCostofGoodsSoldandInventory

E7–8.

Req.1

BECKINC.

IncomeStatement

FortheYearEndedDecember31,2023

CaseA

FIFO

CaseB

LIFO

Salesrevenue1...............................

Costofgoodssold:

Beginninginventory..............

Purchases...............................

Goodsavailableforsale2

Endinginventory3...................

Costofgoodssold4.........

Grossprofit..................................

Expenses..................................

Pretaxincome.................................

$35,000 281,000 316,000 128,000

$704,000

188,000 516,000 500,000$16,000

$704,000

$35,000

281,000

316,000

80,000

236,000 468,000 500,000

$(32,000)

Computations:

(1)Sales:(8,000units@$28)+(16,000units@$30)=$704,000

(2)Goodsavailableforsale(forbothcases):

UnitsUnitCostTotalCost

Beginninginventory

Purchase,March5,2023

Purchase,September19,2023Goodsavailableforsale

7,000

19,000

10,000

36,000

$35,000

171,000

110,000

$316,000

(3)Endinginventory(36,000available–24,000unitssold=12,000units):

CaseA

CaseB

FIFO:

(10,000units@$11=$110,000)+

(2,000units@$9=$18,000)=$128,000.

LIFO:

(7,000units@$5=$35,000)+

(5,000units@$9=$45,000)=$80,000.

7-14

SolutionsManual

Chapter07-ReportingandInterpretingCostofGoodsSoldandInventory

E7–8.(continued)

Req.1(continued)

(4)Costofgoodssold(24,000unitssold):

CaseA

CaseB

FIFO:

(7,000units@$5=$35,000)+

(17,000units@$9=$153,000)=$188,000

LIFO:

(10,000units@$11=$110,000)+

(14,000units@$9=$126,000)=$236,000

Req.2

ComparisonofAmounts

CaseA

FIFO

CaseB

LIFO

PretaxIncome

Difference

$16,000

$(32,000)

$48,000

EndingInventory128,00080,000

Difference48,000

Theabovetabulationdemonstratesthatthepretaxincomedif

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