会计学基础第七章答案

1、Chapter 07 - Reporting and Interpreting Inventories and Cost of Goods Sold 7-1 Chapter 7 Reporting and Interpreting Inventories and Cost of Goods Sold ANSWERS TO QUESTIONS 1.Three goals of inventory management are to make or buy products (1) in sufficient quantities to avoid stock-outs (which could

2、result in lost sales revenue and decreases in customer satisfaction), (2) that provide expected levels of quality, (3) at the lowest possible cost by minimizing the costs of obtaining and carrying inventory (purchasing, production, storage, spoilage, theft, obsolescence, and financing). 2. Merchandi

3、sers hold merchandise inventory, which usually is acquired in a finished condition and is ready for sale without further processing. Manufacturers often hold three types of inventory, with each representing a different stage in the manufacturing process: (1) Raw materials inventory includes material

4、s that eventually are processed further to produce finished goods. Items are included in raw materials inventory until they enter the production process, at which time they become part of work in process inventory. (2) Work in process inventory includes goods that are in the process of being manufac

5、tured, but are not yet complete. When completed, work in process inventory becomes finished goods inventory. (3) Finished goods inventory includes manufactured goods that are complete and ready for sale. At this stage, finished goods are treated just like merchandise inventory. 3. When goods are sol

6、d FOB destination, their cost is removed from the inventory account and reported as an expense only when the goods reach their destination. Because the goods were shipped on September 30, they will not reach their destination until October. Consequently, the company should continue to include the co

7、st of the goods in inventory on September 30. 4. Goods available for sale is the sum of the beginning inventory and the amount of goods purchased or made during the period. Cost of goods sold is the cost of goods actually sold, which can be determined by subtracting the cost of ending inventory from

8、 the cost of goods available for sale. Chapter 07 - Reporting and Interpreting Inventories and Cost of Goods Sold 7-2 5. Beginning inventory is the stock of goods on hand (in inventory) at the start of the accounting period. Ending inventory is the stock of goods on hand (in inventory) at the end of

9、 the accounting period. The ending inventory of one period automatically becomes the beginning inventory of the next period. 6.(a)Specific identificationThis inventory costing method requires that each item in the beginning inventory and each item purchased during the period be identified specifical

10、ly so that its unit cost can be determined by identifying the specific item sold. This method usually requires that each item be marked, often with a code that indicates its cost. When it is sold, that unit cost is the cost of goods sold. To determine the amount to report for ending inventory, the s

11、pecific items on hand are valued at the actual cost indicated for each item. (b)FIFOThis inventory costing method assumes that the first units purchased as the first units sold. Under this method cost of goods sold is calculated using the oldest unit costs, and the ending inventory is calculated usi

12、ng the newest unit costs. (c)LIFOThis inventory costing method assumes that the last units purchased are the first units sold. Under this method cost of goods sold is calculated using the newest unit costs and the ending inventory is calculated using the oldest unit costs. (d)Weighted average costTh

13、is inventory costing method in a periodic inventory system is based on a weighted average cost for the entire period. At the end of the accounting period the average cost is computed by dividing the goods available for sale in units into the cost of goods available for sale in dollars. The computed

14、unit cost then is used to determine the cost of goods sold for the period by multiplying the units sold by this average unit cost. Similarly, the ending inventory for the period is determined by multiplying this average unit cost by the number of units on hand. 7.The first-in, first-out (FIFO) cost

15、flow assumption is most similar to the gumball machine. Gumballs (inventory) placed first in the machine are the first out through the bottom of the machine. The last-in, first-out (LIFO) cost flow assumption most resembles the stack of bricks. Bricks (inventory) placed last on the stack are the fir

16、st off the stack. The weighted average method is similar to gas in a tank. Although the gas may have been purchased at different times and different costs, it all mixes together in the tank. The gas being used is a weighted average of the various gasoline purchases put into the tank. Chapter 07 - Re

17、porting and Interpreting Inventories and Cost of Goods Sold 7-3 8. Inventory costing does not have to follow the actual flow of a companys products. Due to market prices, income tax effects, and other variables, some companies might want to have more recent costs reported on the balance sheet (FIFO)

18、 while others might want more recent costs reported on the income statement (LIFO). 9.LIFO and FIFO have opposite effects on ending inventory on the balance sheet. The ending inventory is based upon either the oldest unit cost or the newest unit cost, depending upon which method is used. Under FIFO,

19、 the ending inventory is calculated using the latest unit costs, and under LIFO, the ending inventory is calculated using the oldest unit costs. Therefore, when costs are rising (a), the ending inventory reported on the balance sheet will be higher under FIFO than under LIFO. Conversely, when costs

20、are falling (b), the ending inventory on the balance sheet will be higher under LIFO than under FIFO. 10. LIFO versus FIFO affects both cost of goods sold and gross profit on the income statement. When the costs are rising (a), FIFO will give a lower cost of goods sold and hence a higher gross profi

21、t than will LIFO. In contrast, when costs are falling (b), FIFO will give a higher cost of goods sold and, as a result, a lower gross profit. 11. In times of rising costs, LIFO results in the highest Cost of Goods Sold and, therefore, the lowest Net Income. Consequently, it is true that the switch f

22、rom LIFO to FIFO would increase the companys Gross Profit and Net Income. Whether this switch would benefit the managers by increasing their bonus is debatable. One could argue that the managers contracts were negotiated assuming LIFO would be used to calculate Cost of Goods Sold, so any change in i

23、nventory costing method would necessitate a change in the managers contracts. A switch from LIFO to FIFO would likely hurt stockholders because an increase in Gross Profit would lead to greater Income Tax Expense for the company. As a result, the company would have to give up some of its cash that c

24、ould have been invested, used to expand the business, pay down its liabilities, or pay dividends. The increase in Net Income caused by changing methods is unlikely to fool sophisticated investors into thinking the company is more profitable, so the switch is unlikely to lead to an increase in the co

25、mpanys stock price. 12. LCM is applied when market (often defined as current replacement cost) is lower than the cost of units on hand. The LCM requirement to write down ending inventory from cost to market has the immediate effect of (a) reducing Net Income and (b) reducing the Inventory amount rep

26、orted on the balance sheet. 13. A general principle is that a purchaser should include in its Inventory account any costs needed to get its inventory into a condition and location ready for sale. Consistent with this reasoning, transportation costs to obtain inventory (freight-in) are included as a

27、cost of inventory. Any costs incurred after the inventory is ready for sale (such as freight-out to deliver goods to customers) are considered selling, general, and administrative expenses. Chapter 07 - Reporting and Interpreting Inventories and Cost of Goods Sold 7-4 14. If the new evidence causes

28、the market value of the existing inventory to fall below its original cost, the lower of cost or market rule requires that the inventory be written down. This LCM write-down will reduce the Inventory account on the balance sheet and will increase the Cost of Goods Sold account on the income statemen

29、t. (In addition to the decline in Sales, the company may experience significant returns of the drug, which the company would report internally as a contra-revenue account and externally as a reduction in Net Sales.) The question of whether you should tell your friend presents an interesting ethical

30、dilemma with no obvious answer. This situation presents a dilemma because it opposes several moral principles (honesty, loyalty, fairness). Your friendship encourages you to be honest and loyal to your friend (and disclose the truth about the drug), but your terms of employment require that you rema

31、in loyal to the organization. Fairness (and insider trading laws) also dictate that the truth about the drug be disclosed by appropriate individuals in the company who can reach a broader audience. It would be unfair if you were to tell your friend who might then use this information to gain at some

32、one elses expense. 15. The owner is correct in thinking that outsourcing will reduce the amount of inventory that the company needs to carry. All else equal, a reduction in inventory will cause an increase in the inventory turnover ratio (Inventory Turnover Ratio = CGS Average Inventory). The owner

33、might be wrong in her thinking because outsourcing causes the company to rely on someone outside the organization to produce the clothing. Delays in external production or shipping could delay the time required to complete orders, which could lead to customer dissatisfaction. Also, outsourcing could

34、 introduce quality problems, which also could lead to customer dissatisfaction. 16. In a perpetual inventory system, LIFO numbers are calculated using the cost of goods last purchased as of the date of sale. This differs from a periodic system, where the cost of goods sold is calculated as if all sa

35、les occurred at the end of the period. 17.The effects of inventory errors are felt in more than one period because the ending inventory for the current period becomes the beginning inventory of the next period. 18.The two end-of-period adjustments to Inventory and Cost of Goods Sold occur only once

36、per period in a periodic system, whereas the Cost of Goods Sold and Inventory entries occur with every sale in a perpetual system. Chapter 07 - Reporting and Interpreting Inventories and Cost of Goods Sold 7-5 Authors Recommended Solution Time (Time in minutes) Mini-exercisesExercisesProblems Skills

37、 Development Cases* Continuing Case No.TimeNo.TimeNo.TimeNo.TimeNo.Time 15120CP7-130120115 23215CP7-240225 35315CP7-310330 43420CP7-420435 52530CP7-515535 65630CP7-630640 75730CP7-710720 810825PA7-130 93915PA7-240 1051015PA7-310 1151110PA7-420 1231215PA7-515 1351310PA7-630 1431415PA7-710 1561510PB7-

38、130 1661615PB7-240 1761720PB7-310 18101810PB7-430 19101910PB7-515 20102030PB7-630 2130PB7-710 2225C7-160 2315 * It is difficult to estimate the time students will need to complete cases. As with any open-ended project, students could devote significant time to these assignments. While students benef

39、it from the extra effort, we find that some become frustrated by the perceived difficulty of the task. To reduce student frustration and anxiety, make your expectations clear, and offer suggestions (about how to research topics or what companies to select). The skills developed by these cases are in

40、dicated below. Case Financial Analysis Research Ethical Reasoning Critical Thinking TechnologyWritingTeamwork 1x 2x 3xxxxx 4xx 5xxx 6xxx 7xx Chapter 07 - Reporting and Interpreting Inventories and Cost of Goods Sold 7-6 ANSWERS TO MINI-EXERCISES M71 (a)These items are not reported as The Knots inven

41、tory because Emerald Bridal still owns the goods. (b)Winston Wedding Consultants owns the inventory (not The Knot) because the goods were shipped FOB shipping point, meaning that the goods belong to the purchaser the moment they leave the sellers facilities. (c)The Knot would include these items in

42、its inventory because it purchased them FOB shipping point. M72 Type of Business Type of InventoryMerchandisingManufacturing MerchandiseX Finished goodsX Work in processX Raw materialsX M73 Computation:Rearrange the CGS equation (BI + P EI = CGS): Cost of goods sold .$4,827 million + Ending inventor

43、y . 1,374 million Beginning inventory . (1,779) million = Purchases .$4,422 million M74 1. Rising Costs2. Declining Costs a. Lowest net incomeLIFOFIFO b. Lowest ending inventoryLIFOFIFO M75 (a)Declining costsFIFO (b)Rising costsLIFO Chapter 07 - Reporting and Interpreting Inventories and Cost of Goo

44、ds Sold 7-7 M76 FIFO (aka L.I.S.T.) Beginning Inventory100 units x $10 $ 1,000 + Purchases500 units x $13 6,500 Goods Available for Sale 7,500 Ending Inventory (400 $13) 5,200 Cost of Goods Sold (100 $10) + (100 $13) $ 2,300 LIFO (aka F.I.S.T.) Beginning Inventory100 units x $10 $ 1,000 + Purchases5

45、00 units x $13 6,500 Goods Available for Sale 7,500 Ending Inventory (100 $10) + (300 x $13) 4,900 Cost of Goods Sold (200 $13) $ 2,600 Weighted Average Beginning Inventory100 units x $10 $ 1,000 + Purchases500 units x $13 6,500 Goods Available for Sale600 units 7,500 Weighted-average unit cost: $7,

46、500 600 units = $12.50 per unit Weighted Average Beginning Inventory100 units x $10 $ 1,000 + Purchases500 units x $13 6,500 Goods Available for Sale 7,500 Ending Inventory (400 $12.50) 5,000 Cost of Goods Sold (200 $12.50) $ 2,500 FIFO LIFO Weighted Average Sales a$3,000 $3,000$3,000 Cost of goods

47、sold (see above) 2,300 2,600 2,500 Gross profit$ 700 $ 400$ 500 a Sales: $3,000 = 200 units x $15 Chapter 07 - Reporting and Interpreting Inventories and Cost of Goods Sold 7-8 M77 Goods available for sale - All methodsUnitsUnit CostTotal Cost Beginning inventory2,000 $20$ 40,000 Next units in (7/13

48、 purchase)6,000 22 132,000 Next units in (7/25 purchase) 8,000 25 200,000 Goods available for sale16,000$372,000 Ending inventory and cost of goods sold: a. First-in, first-out: Ending Inventory(7,000 units x $25)$175,000 Cost of goods sold(2,000 units x $20) (6,000 units x $22) (1,000 units x $25)$

49、197,000 b.Last-in, first-out: Ending Inventory(2,000 units x $20) (5,000 units x $22)$150,000 Cost of goods sold(8,000 units x $25) (1,000 units x $22)$222,000 c.Weighted average cost: Average unit cost$372,000 16,000 = $23.25 per unit Ending inventory(7,000 units x $23.25)$162,750 Cost of goods sol

50、d(9,000 units x $23.25)$209,250 To double-check calculations, use the CGS equation as follows: a. FIFOb. LIFOc. WAC Beginning inventory$ 40,000$ 40,000$ 40,000 + Purchases 332,000 332,000 332,000 = Cost of Goods Available for Sale 372,000 372,000 372,000 Ending inventory 175,000 150,000 162,750 = Co

51、st of Goods Sold$ 197,000$ 222,000$ 209,250 Chapter 07 - Reporting and Interpreting Inventories and Cost of Goods Sold 7-9 M78 Goods available for sale - All methodsUnitsUnit CostTotal Cost First units in (January 1)300 $7$2,100 Next units in (January 8)4508 3,600 Next units in (January 29) 7509 6,7

52、50 Total1,500$12,450 Cost of goods sold and ending inventory: a. First-in, first-out: Cost of goods sold(300 units x $7) (300 units x $8)$4,500 Ending Inventory(750 units x $9) (150 units x $8)$7,950 b.Last-in, first-out: Cost of goods sold(600 units x $9)$5,400 Ending Inventory(300 units x $7) (450

53、 units x $8) (150 units x $9)$7,050 c.Weighted-average cost: Average unit cost$12,450 1,500 = $8.30 Cost of goods sold(600 units x $8.30)$4,980 Ending inventory(900 units x $8.30)$7,470 To double-check calculations, use the CGS equation as follows: a. FIFOb. LIFOc. WAC Beginning inventory$ 0$ 0$ 0 +

54、 Purchases 12,450 12,450 12,450 = Cost of Goods Available for Sale 12,450 12,450 12,450 Ending inventory 7,950 7,050 7,470 = Cost of Goods Sold$ 4,500$ 5,400$ 4,980 Chapter 07 - Reporting and Interpreting Inventories and Cost of Goods Sold 7-10 M79 Cost per item Replacement cost per item Lower of co

55、st or marketQuantity Total reported Necklaces$ 75$70$705050 x $70 = $3,500 Bracelets 60 50 502525 x $50 = $1,250 Total$4,750 M710 Assets = Liabilities + Stockholders Equity Inventory -336 million Cost of Goods Sold (+E) -336 million dr Cost of Goods Sold (+E, SE).336,000,000 cr Inventory (-A).336,00

56、0,000 To record inventory write down to LCM. M7-11 Merchandise cost$23,000 Transportation cost+650 Returned goods-1,200 Purchase discount ($23,000 - $1,200) x 2%-436 $22,014 M7-12 (a)dr Inventory (+A) .23,000 cr Accounts Payable (+L) .23,000 To record inventory purchased on account. (b)dr Inventory (+A).650 cr Accounts Payable (+L) .650 To record transportation costs. (c)dr Accounts Payable (-L) . 1,200 cr Inventory (-A).1,200 To record goods returned. (d)dr Accounts Payable (-L).21,800 cr Cash (-A) ($21,800 x 98%).