U. Ac .TH: Instructions

Printed by: pimchanok_kha@cmu.ac.th. Printing is for personal use only.
No part of this book may be reproduced or transmitted

without publisher's prior permission. Violators will be prosecuted.
Instructions
Compute the amount of the loss as a result of the fire, assuming that the company had
no insurance coverage.
E9.17 (LO 3) (Gross Profit Method) Yao Ming of Rocket Ltd. calls you on July 16 and
asks you to prepare a claim for insurance as a result of a theft that took place the night
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before. You suggest that an inventory be taken immediately. The following data are
available (amounts in thousands).
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Inventory, July 1 ¥38,000
Purchases—goods placed in stock July 1–15 90,000
u.
Sales—goods delivered to customers (gross) 116,000
Sales returns—goods returned to stock 4,000
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Your client reports that the goods on hand on July 16 cost ¥30,500, but you determine
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that this figure includes goods of ¥6,000 received on a consignment basis. Your past
records show that sales are made at approximately 25% over cost. Rocket’s insurance
covers only goods owned.
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Instructions
_k
Compute the claim against the insurance company.

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E9.18 (LO 3) (Gross Profit Method) Sliver Lumber Company handles three principal
lines of merchandise with these varying rates of gross profit on cost.
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Lumber 25%
Millwork 30%
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Hardware 40%
On August 18, a fire destroyed the office, lumber shed, and a considerable portion of
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the lumber stacked in the yard. To file a report of loss for insurance purposes, the
company must know what the inventories were immediately preceding the fire. No
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detail or perpetual inventory records of any kind were maintained. The only pertinent
information you are able to obtain are the following facts from the general ledger,
which was kept in a fireproof vault and escaped destruction.
Lumber Millwork Hardware

Inventory, Jan. 1, 2022 $250,000 $90,000 $45,000
Purchases to Aug. 18, 2022 1,500,000 375,000 160,000
Printed by: pimchanok_kha@cmu.ac.th. Printing is for personal use only. No part of this book may be reproduced or transmitted
Sales to Aug. 18, 2022 2,050,000 533,000 245,000
Instructions
Submit your estimate of the inventory amounts immediately preceding the fire.
E9.19 (LO 3) (Gross Profit Method) Presented below is information related to Jerrold
Ltd. for the current year.
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Beginning inventory £600,000
Purchases 1,500,000
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Total goods available for sale £2,100,000
Sales 2,300,000
u.
Instructions
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Compute the ending inventory, assuming that (a) gross profit is 40% of sales, (b) gross
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profit is 60% of cost, (c) gross profit is 35% of sales, and (d) gross profit is 25% of cost.
E9.20 (LO 4) (Retail Inventory Method) Presented below is information related to

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Luzon SA.
Cost Retail
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Beginning inventory R$58,000 R$100,000

Purchases (net) 122,000 200,000
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Net markups 20,000

Net markdowns 30,000
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Sales 186,000
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Instructions
1. Compute the ending inventory at retail.

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2. Compute a cost-to-retail percentage (round to two decimals) under the following

conditions.
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1. Excluding both markups and markdowns.

2. Excluding markups but including markdowns.
3. Excluding markdowns but including markups.
4. Including both markdowns and markups.
3. Which of the methods in (b) above (1, 2, 3, or 4) does the following?
1. Provides the most conservative estimate of ending inventory.
2. Provides an approximation of LCNRV.
3. Is used in the conventional retail method.
4. Compute ending inventory at LCNRV (round to nearest dollar).

5. Compute cost of goods sold based on (d).
6. Compute gross margin based on (d).
E9.21 (LO 4) (Retail Inventory Method) Presented below is information related to

Kuchinsky Company.
Cost Retail
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Beginning inventory €200,000 €280,000
Purchases 1,425,000 2,140,000
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Markups 95,000
Markup cancellations 15,000
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Markdowns 35,000
Markdown cancellations 5,000
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Sales 2,250,000
Instructions @c
Compute the inventory by the conventional retail inventory method.
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E9.22 (LO 4) (Retail Inventory Method) The records of Mandy’s Boutique report the
following data for the month of April.
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Sales £95,000 Purchases (at cost) £55,000

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Sales returns 2,000 Purchases (at sales price) 88,000

Markups 10,000 Purchase returns (at cost) 2,000
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Markup cancellations 1,500 Purchase returns (at sales price) 3,000

Markdowns 9,300 Beginning inventory (at cost) 30,000
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Markdown cancellations 2,800 Beginning inventory (at sales price) 46,500

Freight on purchases 2,400
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Instructions
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Compute the ending inventory by the conventional retail inventory method.
E9.23 (LO 5) (Analysis of Inventories) The financial statements of AB InBev’s (BEL)

2018 annual report disclosed the following information.
(in millions) 31 December 2018 31 December 2017

Inventories $4,234 $4,119
Fiscal Year
2018 2017
Sales $54,619 $56,444
Cost of sales 20,359 21,386
Net income 5,691 9,183
Instructions
.th
Compute AB InBev’s (a) inventory turnover and (b) average days to sell inventory for
2018.
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Problems
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P9.1 (LO 1) (LCNRV) Remmers SE manufactures desks. Most of the company’s desks
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are standard models and are sold on the basis of catalog prices. At December 31,
2022, the following finished desks appear in the company’s inventory.
Finished Desks @c A B C D
2022 catalog selling price €450 €480 €900 €1,050
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FIFO cost per inventory list 12/31/22 470 450 830 960
Estimated cost to complete and sell 50 110 260 200
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2023 catalog selling price 500 540 900 1,200

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The 2022 catalog was in effect through November 2022, and the 2023 catalog is
effective as of December 1, 2022. All catalog prices are net of the usual discounts.
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Instructions
At what amount should each of the four desks appear in the company’s December 31,
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2022, inventory, assuming that the company has adopted a lower-of-FIFO-cost-or-net

realizable value approach for valuation of inventories on an individual-item basis?
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P9.2 (LO 1) (LCNRV) Garcia Home Improvement plc installs replacement

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siding, windows, and louvered glass doors for single-family homes and condominium
complexes. The company is in the process of preparing its annual financial statements
for the fiscal year ended May 31, 2022. Jim Alcide, controller for Garcia, has gathered
the following data concerning inventory.
At May 31, 2022, the balance in Garcia’s Raw Materials Inventory account was £408,000,
and Allowance to Reduce Inventory to NRV had a credit balance of £27,500. Alcide
summarized the relevant inventory cost and market data at May 31, 2022, in the
schedule below.
Alcide assigned Patricia Devereaux, an intern from a local college, the task of
calculating the amount that should appear on Garcia’s May 31, 2022, financial
statements for inventory under the LCNRV rule as applied to each item in inventory.
Devereaux expressed concern over departing from the historical cost principle.
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Cost Sales Price Net Realizable Value
Aluminum siding £70,000 £64,000 £56,000
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Cedar shake siding 86,000 94,000 84,800
Louvered glass doors 112,000 186,400 168,300
u.
Thermal windows 140,000 154,800 140,000
Total £408,000 £499,200 £449,100
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Instructions
1.
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1. Determine the proper balance in Allowance to Reduce Inventory to Net
Realizable Value at May 31, 2022.
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2. For the fiscal year ended May 31, 2022, determine the amount of the gain or
loss that would be recorded (using the loss method) due to the change in
Allowance to Reduce Inventory to Net Realizable Value.
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2. Explain the rationale for the use of the LCNRV rule as it applies to inventories.
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P9.3 (LO 1) (LCNRV—Cost-of-Goods-Sold and Loss) Malone Company determined its

ending inventory at cost and at LCNRV at December 31, 2022, December 31, 2023, and
December 31, 2024, as shown below.
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Cost LCNRV
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12/31/22 $650,000 $650,000

12/31/23 780,000 712,000
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12/31/24 905,000 830,000

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Instructions
1. Prepare the journal entries required at December 31, 2023, and at December 31,
2024, assuming that a perpetual inventory system and the cost-of-goods-sold
method of adjusting to LCNRV are used.
2. Prepare the journal entries required at December 31, 2023, and at December 31,
2024, assuming that a perpetual inventory is recorded at cost and reduced to
LCNRV using the loss method.
P9.4 (LO 2) (Valuation at Net Realizable Value) Finn Berge realized his lifelong dream
of becoming a vineyard owner when he was able to purchase the Hillside Vineyard at
an estate auction in August 2022 for €750,000. Finn retained the Hillside name for his
new business. The purchase was risky because the growing season was coming to an
end, the grapes had to be harvested in the next several weeks, and Finn had limited
experience in carrying off a grape harvest.
At the end of the first quarter of operations, Finn felt pretty good about his early
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results. The first harvest was a success; 300 bushels of grapes were harvested with a
value of €30,000 (based on current local commodity prices at the time of harvest). And,
given the strong yield from area vineyards during the season, the net realizable value
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of Finn’s vineyard had increased by €15,000 at the end of the quarter. After storing the
grapes for a short period of time, Finn was able to sell the entire harvest for €35,000.
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Instructions
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1. Prepare the journal entries for the Hillside biological asset (grape vines) for the
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first quarter of operations (the beginning carrying and net realizable value is
€750,000).
2. Prepare the journal entry for the grapes harvested during the first quarter.
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3. Prepare the journal entry to record the sale of the grapes harvested in the first
quarter.
4. Determine the total effect on income for the quarter related to the Hillside
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biological asset and agricultural produce.

5. Looking to the next growing season, Finn is doing some forecasting, based on the
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following two developments: (1) demand is expected to increase for the type of
grapes his vineyard produces and (2) there are new producing vineyards coming
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on line that will increase the supply of similar grapevines in the market. Briefly
discuss how these developments are likely to affect the value of Hillside’s
biological assets and agricultural produce in the next growing season.
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P9.5 (LO 3) (Gross Profit Method) Yu Ltd. lost most of its inventory in a fire in
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December just before the year-end physical inventory was taken. Company records
disclose the following (yen in thousands).
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Inventory (beginning) ¥80,000 Sales ¥415,000

Purchases 290,000 Sales returns 21,000
Purchase returns 28,000 Gross profit % based on net selling price 35%
Merchandise with a selling price of ¥30,000 remained undamaged after the fire, and
damaged merchandise has a residual value of ¥8,150. The company does not carry fire
insurance on its inventory.
Instructions
Prepare a formal labeled schedule computing the fire loss incurred. (Do not use the
retail inventory method.)
P9.6 (LO 3) (Gross Profit Method) On April 15, 2022, fire damaged the
office and warehouse of Stanislaw ASA. The only accounting record saved was the
general ledger, from which the trial balance below was prepared.
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Stanislaw ASA
Trial Balance
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March 31, 2022
Cash €20,000
u.
Accounts receivable 40,000
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Inventory, December 31, 2021 75,000
Land 35,000
Equipment
Accumulated depreciation—equipment
@c 110,000
€41,300
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Other assets 3,600
Accounts payable 23,700
Other expense accruals 10,200
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Share capital—ordinary 100,000

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Retained earnings 52,000

Sales revenue 135,000
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Purchases 52,000
Miscellaneous expenses 26,600
€362,200 €362,200
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The following data and information have been gathered.

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1. The fiscal year of the company ends on December 31.

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2. An examination of the April bank statement and canceled checks revealed that
checks written during the period April 1–15 totaled €13,000: €5,700 paid to
accounts payable as of March 31, €3,400 for April merchandise shipments, and
€3,900 paid for other expenses. Deposits during the same period amounted to
€12,950, which consisted of receipts on account from customers with the
exception of a €950 refund from a vendor for merchandise returned in April.
3. Correspondence with suppliers revealed unrecorded obligations at April 15 of
€15,600 for April merchandise shipments, including €2,300 for shipments in
transit (f.o.b. shipping point) on that date.

4. Customers acknowledged indebtedness of €46,000 at April 15, 2022. It was also
estimated that customers owed another €8,000 that will never be acknowledged
or recovered. Of the acknowledged indebtedness, €600 will probably be
uncollectible.
5. The companies insuring the inventory agreed that Stanislaw’s fire-loss claim
should be based on the assumption that the overall gross profit ratio for the past
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2 years was in effect during the current year. The company’s audited financial
statements disclosed this information:
Year Ended
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December 31
2021 2020
u.
Net sales €530,000 €390,000
Net purchases 280,000 235,000
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Beginning inventory 50,000 66,000
Ending inventory
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75,000 50,000
6. Inventory with a cost of €7,000 was salvaged and sold for €3,500. The balance of
the inventory was a total loss.
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Instructions
_k
Prepare a schedule computing the amount of inventory fire loss. The supporting
schedule of the computation of the gross profit should be in good form.
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P9.7 (LO 4) (Retail Inventory Method) The records for the Clothing Department of
Wei’s Discount Store are summarized below for the month of January (HK$ in
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thousands).
Inventory, January 1: at retail HK$25,000; at cost HK$17,000

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Purchases in January: at retail HK$137,000; at cost HK$82,500

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Freight-in: HK$7,000
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Purchase returns: at retail HK$3,000; at cost HK$2,300
Transfers-in from suburban branch: at retail HK$13,000; at cost HK$9,200
Net markups: HK$8,000
Net markdowns: HK$4,000
Inventory losses due to normal breakage, etc.: at retail HK$400

Sales at retail: HK$95,000
Sales returns: HK$2,400
Instructions
1. Compute the inventory for this department as of January 31, at retail prices.
2. Compute the ending inventory using lower-of-average-cost-or-net realizable
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value.
P9.8 (LO 4) (Retail Inventory Method) Presented below is information related to
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Waveland Inc.
Cost Retail
u.
Inventory, 12/31/22 $250,000 $ 390,000
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Purchases 914,500 1,460,000
Purchase returns 60,000 80,000
Purchase discounts @c
Gross sales (after employee discounts) —
18,000 —
1,410,000
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Sales returns — 97,500
Markups — 120,000
Markup cancellations — 40,000
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Markdowns — 45,000
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Markdown cancellations — 20,000

Freight-in 42,000 —
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Employee discounts granted — 8,000

Loss from breakage (normal) — 4,500
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Instructions
Assuming that Waveland Inc. uses the conventional retail inventory method, compute
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the cost of its ending inventory at December 31, 2022.

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P9.9 (LO 4) (Retail Inventory Method) Fuque Ltd. 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 2022.
Inventory, October 1, 2022

At cost £52,000
At retail 78,000
Purchases (exclusive of freight and returns)

At cost 272,000
At retail 423,000
Freight-in 16,600
Purchase returns
At cost 5,600
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At retail 8,000
Markups 9,000
Markup cancellations 2,000
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Markdowns (net) 3,600
Normal spoilage and breakage 10,000
u.
Sales 390,000
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Instructions
@c
1. Using the conventional retail method, prepare a schedule computing estimated
LCNRV inventory for October 31, 2022.
2. A department store using the conventional retail inventory method estimates the
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cost of its ending inventory as £60,000. An accurate physical count reveals only
£47,000 of inventory at LCNRV. List the factors that may have caused the
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difference between the computed inventory and the physical count.
P9.10 (LO 1, 2, 5) (Statement and Note Disclosure, LCNRV, and Purchase

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Commitment) Maddox Specialty Company, a division of Lost World Inc., manufactures

three models of gear shift components for bicycles that are sold to bicycle
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manufacturers, retailers, and catalog outlets. Since beginning operations in 1986,

Maddox has used normal absorption costing and has assumed a first-in, first-out cost
flow in its perpetual inventory system. The balances of the inventory accounts at the
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end of Maddox’s fiscal year, November 30, 2022, are shown below. The inventories are
stated at cost before any year-end adjustments.
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Finished goods $647,000

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Work-in-process 112,500
Raw materials 264,000
Factory supplies 69,000
The following information relates to Maddox’s inventory and operations.
1. The finished goods inventory consists of the items analyzed below.

Cost Net Realizable Value
Down tube shifter

Standard model $67,500 $67,000
Click adjustment model 94,500 89,000
Deluxe model 108,000 110,000
Total down tube shifters 270,000 266,000
Bar end shifter
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Standard model 83,000 90,050
Total bar end shifters 182,000 187,600
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Head tube shifter
Standard model 78,000 77,650
u.
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Total head tube shifters 195,000 196,950
Total finished goods $647,000 $650,550
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2. One-half of the head tube shifter finished goods inventory is held by catalog
outlets on consignment.
3. Three-quarters of the bar end shifter finished goods inventory has been pledged
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as collateral for a bank loan.
4. One-half of the raw materials balance represents derailleurs acquired at a
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contracted price 20% above the current market price. The net realizable value of
the rest of the raw materials is $127,400.
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5. The net realizable value of the work-in-process inventory is $108,700.

6. Included in the cost of factory supplies are obsolete items with an historical cost
of $4,200. The net realizable value of the remaining factory supplies is $65,900.
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7. Maddox applies the LCNRV method to each of the three types of shifters in
finished goods inventory. For each of the other three inventory accounts,
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Maddox applies the LCNRV method to the total of each inventory account.
8. Consider all amounts presented above to be material in relation to Maddox’s
financial statements taken as a whole.
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Instructions
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1. Prepare the inventory section of Maddox’s statement of financial position as of

November 30, 2022, including any required note(s).
2. Without prejudice to your answer to (a), assume that the net realizable value of
Maddox’s inventories is less than cost. Explain how this decline would be
presented in Maddox’s income statement for the fiscal year ended November 30,
2022.
3. Assume that Maddox has a firm purchase commitment for the same type of
derailleur included in the raw materials inventory as of November 30, 2022, and
that the purchase commitment is at a contracted price 15% greater than the
current market price. These derailleurs are to be delivered to Maddox after
November 30, 2022. Discuss the impact, if any, that this purchase commitment
would have on Maddox’s financial statements prepared for the fiscal year ended
November 30, 2022.
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P9.11 (LO 1) (LCNRV) Taipai Ltd. follows the practice of valuing its inventory at
the LCNRV. The following information is available from the company’s inventory
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records as of December 31, 2022 (amounts in thousands).
Item Quantity Unit Cost Estimated Selling Price/Unit Completion & Selling Cost/Unit
u.
A 1,100 NT$7.50 NT$10.50 NT$1.50
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B 800 8.20 9.40 1.30
C 1,000 5.60 7.20 1.75
D
E
1,000
1,400
3.80
6.40
@c
6.30
6.70
1.80
0.70
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Instructions
_k
Jay Shin is an accounting clerk in the accounting department of Taipai Co., and he
cannot understand how completion and selling costs affect the determination of net
realizable value. Jay is very confused, and he is the one who records inventory
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purchases and calculates ending inventory. You are the manager of the department
and an accountant.
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1. Calculate the LCNRV using the “individual-item” approach.

2. Show the journal entry he will need to make in order to write down the ending
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inventory from cost to NRV.

3. Then, write a memo to Jay explaining what net realizable value is, as well as how it
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is computed. Use your calculations to aid in your explanation.

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Concepts for Analysis
CA9.1 (LO 1) (LCNRV) You have been asked by the financial vice president to
develop a short presentation on the LCNRV method for inventory purposes. The
financial VP needs to explain this method to the president because it appears that a
portion of the company’s inventory has declined in value.
Instructions
The financial vice president asks you to answer the following questions.
1. What is the purpose of the LCNRV method?

2. What is meant by “net realizable value”?
3. Do you apply the LCNRV method to each individual item, to a category, or to the
total of the inventory? Explain.
4. What are the potential disadvantages of the LCNRV method?
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CA9.2 (LO 1) (LCNRV) The net realizable value of Lake Corporation’s inventory
has declined below its cost. Allyn Conan, the controller, wants to use the loss method
to write down inventory because it more clearly discloses the decline in the net
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realizable value and does not distort the cost of goods sold. His supervisor, financial
vice president Bill Ortiz, prefers the cost-of-goods-sold method to write down
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inventory because it does not call attention to the decline in net realizable value.
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Instructions
Answer the following questions.

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1. What, if any, is the ethical issue involved?
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2. Is any stakeholder harmed if Bill Ortiz’s preference is used?
3. What should Allyn Conan do?
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CA9.3 (LO 1) (LCNRV) Ogala NV purchased a significant amount of raw materials

inventory for a new product that it is manufacturing.
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Ogala uses the LCNRV rule for these raw materials. The net realizable value of the raw
materials is below the original cost.
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Ogala uses the FIFO inventory method for these raw materials. In the last 2 years, each
purchase has been at a lower price than the previous purchase, and the ending
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inventory quantity for each period has been higher than the beginning inventory
quantity for that period.
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Instructions
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1. 1. At which amount should Ogala’s raw materials inventory be reported on the

statement of financial position? Why?
2. In general, why is the LCNRV rule used to report inventory?
2. What would have been the effect on ending inventory and cost of goods sold had
Ogala used the average-cost inventory method instead of the FIFO inventory
method for the raw materials? Why?
CA9.4 (LO 4) (Retail Inventory Method) 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 for information about the
conventional retail method of pricing inventories at the retail store.
Instructions
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Prepare a report to the president explaining the retail method of pricing inventories.
Your report should include the following points.
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1. Description and accounting features of the method.
2. The conditions that may distort the results under the method.
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3. A comparison of the advantages of using the retail method with those of using
cost methods of inventory pricing.
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4. The accounting theory underlying the treatment of net markdowns and net
markups under the method.
@c
CA9.5 (LO 1, 4) (Cost Determination, LCNRV, Retail Method) Olson ASA, a retailer
and wholesaler of brand-name household lighting fixtures, purchases its inventories
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from various suppliers.
Instructions
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1. 1. What criteria should be used to determine which of Olson’s costs are

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inventoriable?
2. Are Olson’s administrative costs inventoriable? Defend your answer.
2. 1. Olson uses the LCNRV rule for its wholesale inventories. What are the
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theoretical arguments for that rule?

2. The net realizable value of the inventories is below the original cost. What
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amount should be used to value the inventories? Why?

3. Olson calculates the estimated cost of its ending inventories held for sale at retail
using the conventional retail inventory method. How would Olson treat the
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beginning inventories and net markdowns in calculating the cost ratio used to
determine its ending inventories? Why?
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CA9.6 (LO 2) (Purchase Commitments) Prophet Company signed a long-term

purchase contract to buy timber from the government 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 governmental price is $250 per
thousand board feet. At this rate, the market price is $5,000,000. Hu Cho, the
controller, wants to recognize the loss in value on the year-end financial statements,
but the financial vice president, Rondo Star, argues that the loss is temporary and
should be ignored. Cho notes that market price has remained near $250 for many
months, and he sees no sign of significant change.
Instructions
1. What are the ethical issues, if any?

2. Is any particular stakeholder harmed by the financial vice president’s decision?
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3. What should the controller do?
Using Your Judgment
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Financial Reporting Problem
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Marks and Spencer plc (M&S)
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The financial statements of M&S (GBR) are presented in Appendix A. The company’s
@c
complete annual report, including the notes to the financial statements, is available
online.
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Instructions
Refer to M&S’s financial statements and the accompanying notes to answer the
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following questions.
1. How does M&S value its inventories? Which inventory costing method does M&S
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use as a basis for reporting its inventories?

2. How does M&S report its inventories in the statement of financial position? In the
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notes to its financial statements, what descriptions are used to classify its
inventories?
3. What was M&S inventory turnover in 2019? What is its gross profit percentage?
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Evaluate M&S’s inventory turnover and its gross profit percentage.

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Comparative Analysis Case

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adidas and Puma
The financial statements of adidas (DEU) and Puma (DEU) are presented in
Appendices B and C, respectively. The complete annual reports, including the notes to
the financial statements, are available online.
Instructions
Use the companies’ financial information to answer the following questions.

1. What is the amount of inventory reported by adidas at December 31, 2018, and
by Puma at December 31, 2018? What percent of total assets is invested in
inventory by each company?
2. What inventory costing methods are used by adidas and Puma? How does each
company value its inventories?
3. In the notes, what classifications (description) are used by adidas and Puma to
categorize their inventories?
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4. Compute and compare the inventory turnovers and days to sell inventory for
adidas and Puma for 2018. Indicate why there might be a significant difference
between the two companies.
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Financial Statement Analysis Case
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Barrick Gold Corporation
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Barrick Gold Corporation (CAN) is the world’s largest and most profitable gold mining
company outside South Africa. Part of the key to Barrick’s success has been its ability
@c
to maintain cash flow while improving production and increasing its reserves of gold
claims. Recently, Barrick has achieved record growth in cash flow, production, and
reserves.
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The company maintains an aggressive policy of developing previously identified target

areas that may contain large amounts of gold ore and that have not been previously
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developed. Barrick limits their risk by choosing sites that are located in politically
stable regions and by their use of internally generated funds, rather than debt, to
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finance growth.
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Barrick’s inventories are as follows.
Barrick Gold Corporation

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Inventories (in millions, U.S. dollars)

Current
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Gold in process $133

Mine operating supplies 82
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$215
Non-current (included in Other assets)
Ore in stockpiles $65
Instructions
1. Why do you think that there are no finished goods inventories? Why do you think
that the raw material (stockpiles of ore) is considered to be a non-current asset?
2. Consider that Barrick has no finished goods inventories. What journal entries are
made to record a sale?
3. Suppose that gold bullion that cost $1.8 million to produce was sold for $2.4
million. The journal entry was made to record the sale, but no entry was made to
remove the gold from the gold in process inventory. How would this error affect
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the following?
Statement of Financial Position Income Statement
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Inventory ? Cost of goods sold ?
Retained earnings ? Net income ?
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Accounts payable ?
Working capital ?
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Current ratio ?
Accounting, Analysis, and Principles @c

Englehart Company sells two types of pumps. One is large and is for commercial use.
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The other is smaller and is used in residential swimming pools. The following inventory
data are available for the month of March.
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Units Value per Unit Total

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Residential Pumps
Inventory at Feb. 28: 200 $400 $80,000
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Purchases:
March 10 500 $450 $225,000
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March 20 400 $475 $190,000

March 30 300 $500 $150,000
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Sales:
March 15 500 $540 $270,000
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March 25 400 $570 $228,000

Inventory at Mar. 31: 500
Commercial Pumps
Inventory at Feb. 28: 600 $800 $480,000
Purchases:
March 3 600 $900 $540,000
March 12 300 $950 $285,000
March 21 500 $1,000 $500,000

Sales:
March 18 900 $1,080 $972,000
March 29 600 $1,140 $684,000
Inventory at Mar. 31: 500
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Compute the claim against the insurance company.

Lumber Millwork Hardware

Sales to Aug. 18, 2022 2,050,000 533,000 245,000

E9.20 (LO 4) (Retail Inventory Method) Presented below is information related to

Beginning inventory R$58,000 R$100,000

Net markups 20,000

1. Compute the ending inventory at retail.

2. Compute a cost-to-retail percentage (round to two decimals) under the following

1. Excluding both markups and markdowns.

4. Compute ending inventory at LCNRV (round to nearest dollar).

E9.21 (LO 4) (Retail Inventory Method) Presented below is information related to

Sales £95,000 Purchases (at cost) £55,000

Sales returns 2,000 Purchases (at sales price) 88,000

Markup cancellations 1,500 Purchase returns (at sales price) 3,000

Markdown cancellations 2,800 Beginning inventory (at sales price) 46,500

Compute the ending inventory by the conventional retail inventory method.

E9.23 (LO 5) (Analysis of Inventories) The financial statements of AB InBev’s (BEL)

(in millions) 31 December 2018 31 December 2017

2023 catalog selling price 500 540 900 1,200

2022, inventory, assuming that the company has adopted a lower-of-FIFO-cost-or-net

P9.2 (LO 1) (LCNRV) Garcia Home Improvement plc installs replacement

P9.3 (LO 1) (LCNRV—Cost-of-Goods-Sold and Loss) Malone Company determined its

12/31/22 $650,000 $650,000

12/31/24 905,000 830,000

biological asset and agricultural produce.

Inventory (beginning) ¥80,000 Sales ¥415,000

Share capital—ordinary 100,000

Retained earnings 52,000

The following data and information have been gathered.

1. The fiscal year of the company ends on December 31.

transit (f.o.b. shipping point) on that date.

Inventory, January 1: at retail HK$25,000; at cost HK$17,000

Purchases in January: at retail HK$137,000; at cost HK$82,500

Purchase returns: at retail HK$3,000; at cost HK$2,300

Transfers-in from suburban branch: at retail HK$13,000; at cost HK$9,200

Net markups: HK$8,000

Net markdowns: HK$4,000

Inventory losses due to normal breakage, etc.: at retail HK$400

Sales at retail: HK$95,000

Sales returns: HK$2,400

P9.8 (LO 4) (Retail Inventory Method) Presented below is information related to

Markdown cancellations — 20,000

Employee discounts granted — 8,000

the cost of its ending inventory at December 31, 2022.

Inventory, October 1, 2022

Purchases (exclusive of freight and returns)

difference between the computed inventory and the physical count.

P9.10 (LO 1, 2, 5) (Statement and Note Disclosure, LCNRV, and Purchase

Commitment) Maddox Specialty Company, a division of Lost World Inc., manufactures

manufacturers, retailers, and catalog outlets. Since beginning operations in 1986,

Finished goods $647,000

The following information relates to Maddox’s inventory and operations.

1. The finished goods inventory consists of the items analyzed below.

Down tube shifter

5. The net realizable value of the work-in-process inventory is $108,700.

1. Prepare the inventory section of Maddox’s statement of financial position as of

1. Calculate the LCNRV using the “individual-item” approach.