西方财务会计课后习题答案.doc

Chapter 6Merchandise Inventory and Cost of Goods Sold Check Points (10 min.) CP 6-1Nissan North AmericaBalance SheetDecember 31, 20X6Current assets:Inventory (300 $80).$24,000Nissan North AmericaIncome StatementYear Ended December 31, 20X6Sales revenue 700 ($80 + $40).$84,000Cost of goods sold (700 $80) 56,000Gross profit.$28,000(10-15 min.) CP 6-21.(Journal entries)Inventory.100,000Accounts Payable.100,000Cash ($140,000 .20)28,000Amounts Receivable ($140,000 .80).112,000Sales Revenue.140,000Cost of Goods Sold.60,000Inventory ($100,000 .60).60,0002.(Financial statements)BALANCE SHEETCurrent assets:Inventory ($100,000 $60,000).$40,000INCOME STATEMENTSales revenue$140,000Cost of goods sold. 60,000Gross profit$ 80,000(10 min.) CP 6-3 BillionsInventory6.4Cash.6.4Accounts Receivable.28.5Sales Revenue.28.5Cost of Goods Sold6.2Inventory.6.2Cash26.3Accounts Receivable.26.3(10 min.) CP 6-41.Inventory costs are increasing from $10 to $14 to $18 per unit.2.FIFO results in the highest cost of ending inventory ($360) because under FIFO the ending inventory is costed at the last costs incurred during the period. When costs are increasing, the last costs are the highest costs.FIFO results in the lowest cost of goods sold. This occurs because the oldest costs are assigned to cost of goods sold. When costs are increasing, the oldest costs are the lowest.FIFO results in the highest gross profit because cost of goods sold, the expense, is the lowest. (Sales revenue is unaffected by the inventory costing method.)3.LIFO results in the lowest cost of ending inventory ($240) because under LIFO, the ending inventory is costed at the oldest costs. When costs are increasing, the oldest costs are the lowest costs.LIFO results in the highest cost of goods sold. This occurs because the last costs of the period are assigned to cost of goods sold. When costs are increasing, the last costs are the highest.LIFO results in the lowest gross profit because cost of goods sold, the expense, is the highest. (Sales revenue is unaffected by the inventory costing method.)(10 min.) CP 6-5 a b cAverage Cost FIFOLIFOCost of goods sold:Average (50 $15*)$750FIFO (10 $10) + (25 $14) + (15 $18)$720LIFO (25 $18) + (25 $14)$800Ending inventory:Average (10 $15*)$150FIFO (10 $18)$180LIFO (10 $10)$100_*Average cost=($100 + $350 + $450)=$15per unit(10 + 25 + 25)(10-15 min.) CP 6-6KinkosIncome StatementYear Ended December 31, 20XX Average FIFO LIFOSales revenue (600 $20)$12,000$12,000$12,000Cost of goods sold (600 $9.90*)5,940(100 $9) + (500 $10)5,900(600 $10) 6,000Gross profit6,0606,1006,000Operating expenses 4,000 4,000 4,000Net income$ 2,060$ 2,100$ 2,000_*Beginning inventory (100 $9.20).$ 920Purchases (700 $10) 7,000Goods available.$7,920Average cost per unit $7,920 / 800 units$ 9.90(10 min.) CP 6-7KinkosIncome StatementYear Ended December 31, 20XX Average FIFO LIFOSales revenue (600 $20)$12,000$12,000$12,000Cost of goods sold (600 $9.90*)5,940(100 $9) + (500 $10)5,900(600 $10)_ 6,000Gross profit6,0606,1006,000Operating expenses 4,000 4,000 4,000Income before income tax$ 2,060$ 2,100$ 2,000Income tax expense (40%)$ 824$ 840$ 800Method to minimize income tax expense.Method to maximize reported income (before tax).*From CP 6-6(5 min.) CP 6-8Lands End managers can delay purchases of inventory until the next year. Under LIFO, high inventory costs that would have been paid for inventory do not become expense as cost of goods sold in the current year. As a result, the current years income statement reports a higher net income than Lands End would have reported if the company had replaced inventory before year end.(5-10 min.) CP 6-9MillionsBALANCE SHEETCurrent assets:Inventories, at market (which is lower than cost).$ 330INCOME STATEMENTCost of goods sold $1,001 + ($333 $330)$1,004(10 min.) CP 6-101. FIFO2. LIFOGross profit percentage:Gross profit=$460*=46%$340*=34%Net sales revenue$1,000$1,000_ *$1,000 $540 = $460*$1,000 $660 = $340Inventory turnover:Cost of goods sold=$540$660Average inventory($100 + $360) / 2($100 + $240) / 2=2.3 times=3.9 times3.Gross profit percentage FIFO looks better.4.Inventory turnover LIFO looks better.(10-15 min.) CP 6-111.Beginning inventory. $ 300,000+Purchases. 1,600,000=Goods available. 1,900,000Cost of goods sold. (1,800,000)=Ending inventory. $ 100,0002.Beginning inventory. $ 300,000+Purchases.same 1,600,000=Goods available. 1,900,000Cost of goods sold:Sales revenue.$3,000,000Less estimated gross profit (40%) (1,200,000)Estimated cost of goods sold.(1,800,000)=Estimated cost of ending inventory. $ 100,000(5-10 min.) CP 6-12CorrectAmount (Millions)a.Inventory ($333 + $3)$ 336b.Net sales (unchanged).$1,755c.Cost of goods sold ($1,001 $3).$ 998d.Gross profit ($754 + $3).$ 757(10 min.) CP 6-131.Last years reported gross profit was understated.Correct gross profit last year was $5.6 million ($4.0 + $1.6).2.This years gross profit is overstated.Correct gross profit for this year is $3.2 million ($4.8 $1.6).3.Langs perspective is better because correcting the error changes the trend of correct gross profit from up (good) to down (bad), as follows:MillionsLast YearThis YearTrendReported gross profit.$4.0$4.8Up (Good)Correct gross profit.$5.6$3.2Down (Bad)(5-10 min.) CP 6-141.Ethical. There is nothing wrong with buying inventory whenever a company wishes.2.Ethical. Same idea as 1.3.Unethical. The company falsified its reported amounts of inventory and net income.4.Unethical. The company falsified its reported inventory purchases, cost of goods sold, and net income in order to cheat the government (and the people) out of income tax.5.Unethical. The company falsified its reported amount of inventory in order to cheat the government (and the people) out of taxes.Exercises(15-20 min.) E 6-1Req. 1 (journal entried)Perpetual System1.Purchases:ThousandsInventory. 2,200Accounts Payable.2,2002.Sales:Cash ($3,500 .20). 700Accounts Receivable ($3,500 .80). 2,800Sales Revenue.3,500Cost of Goods Sold. 2,100Inventory.2,100Req. 2 (financial statement amounts)BALANCE SHEETThousandsCurrent assets:Inventory ($370 + $2,200 $2,100).$ 470INCOME STATEMENTSales revenue.$3,500Cost of goods sold 2,100Gross profit.$1,400(15-25 min.) E 6-2JournalDATEACCOUNT TITLES AND EXPLANATIONDEBITCREDIT1Inventory ($640 + $1,870 + $900).3,410Accounts Payable3,4102Accounts Receivable (17 $500).8,500Sales Revenue.8,500Cost of Goods Sold.2,800*Inventory2,8003Sales revenue$8,500Cost of goods sold. 2,800Gross profit$5,700Ending inventory ($800 + $3,410 $2,800).$1,410_*(9 $160) + (8 $170) = $2,800(10-15 min.) E 6-31.InventoryBegin. Bal.( 5 units $160) 800PurchasesOct. 8( 4 units $160) 64015(11 units $170) 1,870Cost of goods sold26( 5 units $180) 900(17 units $?)?Ending bal.( 8 units $?) ?Cost of Goods SoldEnding Inventory(a)Specificunit cost(6 $160) + (11 $170)=$2,830(3 $160) + (5 $180)=$1,380(b)Averagecost17 $168.40*=$2,8638 $168.40*=$1,347_*Average cost per unit=($800 + $640 + $1,870 + $900)=$168.40(5 + 4 + 11 + 5)(c) FIFO(9 $160) + (8 $170)=$2,800(5 $180) + (3 $170)=$1,410(d) LIFO(5 $180) + (11 $170) + (1 $160)=$2,930(8 $160)=$1,2802.LIFO produces the highest cost of goods sold.FIFO produces the lowest cost of goods sold.The increase in inventory cost from $160 to $170 to $180 per unit causes the difference in cost of goods sold.(15-20 min.) E 6-4Cost of goods sold:LIFO ($2,930) FIFO ($2,800)$130 Income tax rate. .35LIFO advantage in tax savings.$ 46(15 min.) E 6-51.a.FIFOCost of goods sold:(5 $90) + (5 $95).$925Ending inventory:7 $95$665b.LIFOCost of goods sold:10 $95.$950Ending inventory:(5 $90) + (2 $95).$6402.VPA, Inc.Income StatementMonth Ended May 31, 20XXSales revenue (3 $150) + (7 $155).$1,535Cost of goods sold. 925Gross profit.610Operating expenses. 310Income before income tax300Income tax expense (40%) 120Net income$ 180(15 min.) E 6-6Millions1.Gross profit:FIFOLIFOSales revenue$4.9$4.9Cost of goods soldFIFO: 600,000 $7 4.2LIFO: (400,000 $5) + (100,000 $6) + (100,000 $7) 3.3Gross profit$ .7$1.62.Gross profit under FIFO and LIFO differ because inventory costs decreased during the period.If you base your prediction on the decrease in inventory unit cost, then, yes, you would predict that LIFO gross profit would be higher.But if you assume that FIFO produces higher gross profit, then, no, the actual result does not follow your prediction.(15-20 min.) E 6-7DATE:_TO:Rick TaborFROM:Student NameSUBJECT:Proposal for Saving Income TaxWe can save income tax by buying above-normal quantities of inventory before the end of the year. Inventory costs are rising, and the company uses the LIFO inventory method. Under LIFO, the higher cost of year-end purchases of inventory goes straight into cost of goods sold. This increases cost of goods sold and decreases net income and income taxes. Because our inventory levels are lower than normal, we need the inventory anyway. In effect, we can use our cash to buy inventory or to pay income taxes. I think it would be wiser to buy inventory.(10-15 min.) E 6-8Specificunit cost 1.Used to account for automobiles, jewelry, and art objects.Average 2.Provides a middle-ground measure of ending inventory and cost of goods sold. FIFO 3.Maximizes reported income. LIFO 4.Matches the most current cost of goods sold against sales revenue. LIFO 5.Results in an old measure of the cost of ending inventory. LIFO 6.Generally associated with saving income taxes. FIFO 7.Results in a cost of ending inventory that is close to the current cost of replacing the inventory. LIFO 8.Enables a company to buy high-cost inventory at year end and thereby to decrease reported income. LIFO 9.Enables a company to keep reported income from dropping lower by liquidating older layers of inventory. LCM 10.Writes inventory down when replacement cost drops below historical cost.(5-10 min.) E 6-9Jeffrey CorporationIncome Statement (partial)Year Ended December 31, 20X4Sales revenue$225,000Cost of goods sold $110,000 + ($18,000 $17,000). 111,000Gross profit$114,000Note:Cost was used for beginning inventory because cost was lower than market. Market (replacement cost) was used for ending inventory because market was lower than cost.(20-25 min.) E 6-10ABCDE 1WHITEWATER CANOE SALES 2ESTIMATED INCOME UNDER FIFO AND LIFO 3JANUARY 20XX 4 5FIFO LIFOFIFOLIFO 6 7Sales $260,000$260,000$260,000$260,000 8 9Cost of goods sold10Beginning inventory 63,000 63,000 63,000 63,00011Net purchases 159,000 159,000 182,000 182,00012 13Goods available 222,000222,000 245,000 245,00014Ending inventory(85,000) (78,000) (85,000) (78,000)15 16Cost of goods sold 137,000 144,000 160,000 167,00017 18Gross profit 123,000 116,000 100,000 93,00019Operating expenses 83,000 83,000 83,000 83,00020 21Income from operations 40,000 33,000 17,000 10,00022Income tax expense 16,000 13,200 6,800 4,00023 24Net income$ 24,000$ 19,800$ 10,200 $ 6,00025 (15-20 min.) E 6-11(Amounts in millions)a.$ 1,055(Let a = beginning inventory; a + $7,344 $1,294 = $7,105 a = $1,055)b.$ 12,459($19,564 $7,105)d.$150,255($191,329 $41,074)c.$151,904(Let c = Purchases;$19,793 + c $21,442 = $150,255 c = $151,904)e.$ 12,650 ($33,726 $21,076)f.$ 4,367 ($972 + $3,395)g.$ 546 ($513 + $1,005 $972)The Coca-Cola CompanyIncome StatementYear Ended December 31, 20XX(Millions)Net sales$19,564Cost of goods soldBeginning inventory$1,055Net purchases 7,344Goods available8,399Ending inventory (1,294)Cost of goods sold 7,105Gross profit12,459Operating and other expenses 7,886Income before tax4,573Income tax expense ($4,573 .333) 1,523Net income$ 3,050(20-30 min.) E 6-12CompanyGross Profit PercentageInventory TurnoverCoca-Cola$12,459=63.7%$7,105=6.0 times$19,564($1,055 + $1,294) / 2Wal-Mart$41,074=21.5%$150,255=7.3 times$191,329($19,793 + $21,442) / 2Intel$21,076=62.5%$12,650=6.8 times$33,726($1,478 + $2,241) / 2Este Lauder$3,395=77.7%$972=1.8 times$4,367($513 + $546) / 2These ratio values explain the merchandising philosophies of these companies. Wal-Mart has the lowest gross profit percentage (21.5%) and the fastest rate of inventory turnover (7.3 times per year). This makes sense for a volume discounter. Este Lauder has the highest gross profit percentage (77.7%) and the slowest inventory turnover (1.8 times per year). High markups and low turnover go hand-in-hand. Coca-Colas and Intels ratios fall between these extremes.These ratio data suggest that Intel is the most profitable company of this group. (10 min.) E 6-13BillionsSales.$45.7Cost of goods soldBeginning inventory.$ 5.5Purchases. 33.2Goods available.38.7Ending inventory (6.6)Cost of goods sold. 32.1Gross profit.$13.6Gross profit percentage=$13.6=29.8%$45.7Inventory turnover=$32.1=5.3 times($5.5 + $6.6) / 2(10-15 min.) E 6-14Year ended January 31, 20X4:MillionsBudgeted cost of goods sold ($6,500 1.08). $7,020Budgeted ending inventory. 2,200Budgeted goods available. 9,220Actual beginning inventory. (1,900)Budgeted purchases. $7,320(10-15 min.) E 6-15Beginning inventory$ 48,000Net purchases 136,000Goo