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Intermediate Accounting 17th Edition James D. Stice, Earl K. Stice, Fred Skousen - Solutions

The Evening Out Clothing Store values its inventory using the retail inventory method. The following data are available for the month of November 2011:Compute the estimated inventory at November 30, 2011, assuming:1. FIFO2. LIFO3. Averagecost
The Help-U-Suceed Bookstore recently received a shipment of accounting textbooks from the publisher. Following the receipt of the shipment, the FASB issued a major new accounting standard that related directly to the contents of one chapter of the text. Portions of this chapter became "obsolete"
Carmel Department Store uses the retail inventory method. On December 31, 2011, the following information relating to the inventory was gathered:Compute the ending inventory value at December 31, 2011, using:1. The average cost method.2. The lower-of-cost-or-marketmethod.
Miller Mfg. has one LIFO pool. Information relating to the products in this pool is as follows:Beginning inventory, January 1 . . . . . . . . . . . . . . . . . . . . 60 units @ $10 eachPurchase, February 12 . . . . . . . . . . . . . . . . . . . . . . . . . . 45 units @ $12 eachPurchase,
The Wernli Manufacturing Company manufactures a single product. The managers, Brandon and Chris Wernli, decided on December 31, 2008, to adopt the dollar-value LIFO inventory method. The inventory value on that date using the newly adopted dollar-value LIFO method was $700,000.Additional
Jennifer Inc. adopted dollar-value LIFO on December 31, 2008. Data for 2008â€“2011 follow:Inventory and index on the adoption date, December 31, 2008:Dollar-value LIFO inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $250,000Price index at year-end (the base year)
On February 15, 2012, Rooker, Madras & Associates compiled the following information concerning inventory for five years. They used the dollar-value LIFO retail inventory method.Compute the inventory cost at the end of each year under the dollar-value LIFO retail method. (Round all dollar amounts
On October 1, 2011, Sloan Oil Inc. entered into a 6-month, $650,000 purchase commitment for a supply of oil. On December 31, 2011, the market value of oil had fallen to $552,500. Make the journal entries necessary on December 31, 2011, and on March 31, 2012, assuming that the market value of the
Wittenbecher’s, a German company that supplies your firm with a necessary raw material, recently shipped 15,000 units of the material to your production facility.1. Prepare the necessary journal entries to record the purchase of the goods and the subsequent payment 30 days later if the selling
Kyoto Manufacturing produces automobile mufflers, which are then sent to the United States where they are installed in domestically built cars. Truck Inc., a U.S. auto company, received a shipment of mufflers on December 15, 2010. The mufflers were subsequently paid for on January 30, 2011. The
The following information is available for Granite Inc.Instructions: Compute the missingamounts.
Streuling Inc. is preparing its 2011 year-end financial statements. Prior to any adjustments, inventory is valued at $76,050. The following information has been found relating to certain inventory transactions:(a) Goods valued at $11,000 are on consignment with a customer. These goods are not
The Gidewall Corporation uses part 210 in a manufacturing process. Information as to balances on hand, purchases, and requisitions of part 210 is given in the following table:Instructions: What is the closing inventory under each of the following pricing methods? (Round unit costs to three decimal
Records of the Swain New Products Co. show the following data relative to Product M:March 2 Inventory . . . . . . . . . . . . . . . . . . . . . 450 units at $26.003 Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400 units at $33.006 Purchase . . . . . . . . . . . . . . . . . . . .
The Marci Manufacturing Co. was organized in 2009 to produce a single product. The company's production and sales records for the period 2009â€“2011 are summarized below.All units produced in a given year are assigned the same average cost.Instructions:Calculate the gross profit for each of
A portion of the Stark Company's balance sheet appears as follows:Stark Company pays for all operating expenses with cash and purchases all inventory on credit. During 2011, cash totaling $471,700 was paid on accounts payable. Operating expenses for 2011 totaled $220,000. All sales are cash sales.
Norsk Corporation sells household appliances and uses LIFO for inventory costing. The inventory contains 10 different products, and historical LIFO layers are maintained for each of them. The LIFO layers for one of the products, Cook Right, were as follows at December 31, 2010:2009 layer . . . . .
The Greenriver Manufacturing Company manufactures two products: Raft and Float. At December 31, 2010, Greenriver used the FIFO inventory method. Effective January 1, 2011, Greenriver changed to the LIFO inventory method. The retroactive effect of this change is not determinable, and as a result,
Witte Inc. carries four items in inventory. The following per-unit data relate to these items at the end of 2011:Instructions:1. Calculate the value of the inventory under each of the following methods:(a) Cost(b) The lower of cost or market applied to the individual inventory items(c) The lower of
Far East Sales Co. uses the first-in, first-out method in calculating cost of goods sold for three of the products that Far East handles. Inventories and purchase information concerning these three products are given for the month of March. On March 31, Far East's suppliers reduced their prices
The Jamison Appliance Company began business on January 1, 2010. The company decided from the beginning to grant allowances on merchandise traded in as partial payment on new sales. During 2011, the company granted trade-in allowances of $64,035. The wholesale value of merchandise traded in was
The Hansen Company values its inventory at the lower of FIFO cost or market. The inventory accounts at December 31, 2010, had the following balances:Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 92,000Work in process . . . . . . . . . . . . . . . . . . . . .
Reagan Manufacturing began operations five years ago. On August 13, 2011, a fire broke out in the warehouse destroying all inventory and many accounting records relating to the inventory. The information available is presented below. All sales and purchases are on account.Summary of previous years'
The following information was taken from the records of Prairie Company.Instructions:Using the gross profit method, compute the value to be assigned to the inventory as of September 30, 2011, and prepare an income statement for the 9-month period ending on thisdate.
In December 2011, JB Masterpiece Merchandise Inc. had a significant portion of its inventory stolen. The company determined the cost of inventory remaining to be $32,400. The following information was taken from the records of the company:Instructions:Estimate the cost of the stoleninventory.
The Sonntag Corporation has adjusted and closed its books at the end of 2010. The company arrives at its inventory position by a physical count taken on December 31 of each year. In March of 2011, the following errors were discovered:(a) Merchandise that cost $2,500 was sold for $3,400 on December
The following information for Whittier Technologies was taken from the company€™s financial statements (amounts in thousands):Instructions:1. Compute the inventory turnover and the number of days€™ sales in inventory for the years 2009€“2011. Use average inventory in
The Bergman Company sells three different products. Five years ago, management adopted the LIFO inventory method and established three specific pools of goods. Bergman values all incremental layers of inventory at the average cost of purchases within the period. Information relating to the three
Bob's Repair Shop began operations on January 1, 2006. After discussing the matter with his accountant, Bob decided dollar-value LIFO should be used for inventory costing. Information concerning the inventory of Bob's Repair Shop is shown below.Instructions:Compute the inventory value at December
In 2008, Van Hover Inc. adopted the dollar-value LIFO retail inventory method. The January 1, 2008, price index was 1.00. The following data are available for the 4-year period ending December 31, 2011.Instructions:Calculate the inventories to be reported at the end of 2008, 2009, 2010, and 2011.
On November 17, 2011, Antarctic Airlines entered into a commitment to purchase 3,000 barrels of aviation fuel for $150,000 on March 23, 2012. Antarctic entered into this purchase commitment to protect itself against the volatility in the aviation fuel market. By December 31, the purchase price of
Charles & Sons, a U.S. computer supplies firm, had the following transactions with foreign companies during December 2010:(a) Goldstar Co., Ltd., a South Koreaâ€“based firm, sold 5,000 computer hard drives to Charles & Sons for 100,000 won per drive on December 12, 2010. Charles & Sons paid
You are the controller of the Ford Steel Co. The economy enters a period of high inflation. Although profits are higher this year than last, you realize that the cost to replace inventory is also higher. You are aware that many companies are changing to the LIFO inventory method to save taxes in
The White Wove Corporation began operations in 2011. A summary of the first quarter appears below.The White Wove Corporation used the LIFO perpetual inventory method and correctly computed an inventory value of $38,300 at the end of the first quarter. Management is considering changing to a FIFO
Many countries around the world do not allow use of the LIFO method. The harmonization of accounting standards across countries may require a compromise on the use of LIFO concepts. Some accountants in the United States are suggesting the use of a LIFO/FIFO system that would use LIFO on the income
Fay Stocks sells oriental rugs. She uses the FIFO method of inventory costing. The inventory available for sale for a particular style of rug is as follows:On July 31, a wealthy customer purchases three rugs paying $2,600 for each. Fay immediately replaces those rugs with three new rugs at a cost
The Destro Company is experiencing an unusual inventory situation. The replacement cost of its principal product has been declining, but because of a unique market condition, Destro has not had to reduce the selling price of the item. Eric Dona, company controller, is aware that GAAP requires the
The Bright-Lite Shirt Company buys wholesale sweatshirts, nightshirts, T-shirts, and other clothing items and, using a novel 4-color processing system, imprints hundreds of designs on the items. The printed shirts are marketed widely to sports stores, department stores, college campus outlets,
The Ma & Pa Grocery Store has never kept many records. The proceeds from sales are used to pay suppliers for goods delivered. When the owners, Donald and Alicia Wride, need some cash, they withdraw it from the till without any record of it. The Wrides realize that eventually tax returns must be
In 1979 and 1980, the Hunt brothers from Texas attempted to corner the world’s silver market. Their hope was to own enough silver to be able to dictate world prices. They made purchase commitments, which locked in the price they would pay for silver. For a while, their plan worked. The price of
Smith & Sons routinely purchases inventory from Matsutoshi Corp. Because of unpredictability in the foreign currency markets, transactions denominated in yen leave Smith & Sons exposed to the risks associated with exchange rate changes. Identify and discuss methods by which Smith & Sons can reduce
The 2007 financial statements for The Walt Disney Company can be found on the Internet. Locate those financial statements and consider the following questions.1. What inventory valuation method does Disney use?2. How did the change in the level of inventory from September 2006 to September 2007
Circle K was once one of the largest convenience store chains in the United States. Circle K separated its products into two major categories: gasoline and merchandise (Twinkies, beef jerky, soda pop, etc.). Selected financial statement data for the year ended April 30, 1994, follow. (Note: More
The Minnesota Mining and Manufacturing Company (3M) gives the following description of its business: 3M is a diversified technology company with a global presence in the following businesses: industrial and transportation; health care; display and graphics; consumer and office; safety, security and
Ford Motor (automotive) and Caterpillar (heavy equipment) both use the LIFO inventory valuation method. Caterpillar uses it for 75% of its inventories and Ford for 25% of its inventories. Data from the 2007 10-K filings of these two companies follow (in millions of U.S. dollars):1. For both
British Petroleum (BP) is one of the world€™s largest oil exploration, refining, and petrochemical firms. (British Petroleum and Amoco merged in December 1998.) The following data are adapted from BP Amoco€™s 2007 annual report. All numbers are in millions of U.S. dollars.In the
On December 31, 2000, the aggregate replacement cost of all of ExxonMobil’s crude oil and natural gas inventory was approximately $13.9 billion. By December 31, 2001, the aggregate replacement cost of ExxonMobil’s inventory had fallen to $10.9 billion. This reduction in replacement cost was
You are the assistant controller of Duo-Therm Company and are in charge of preparing the financial statements and tax returns. One of your colleagues, the assistant controller in charge of working capital management, has just returned from a 3-day seminar on just-in-time (JIT) inventory. JIT
To help you become familiar with the accounting standards, this case is designed to take you to the FASB’s Web site and have you access various publications. Access the FASB’s Web site at www.fasb.org. Click on “Pronouncements & EITF Abstracts.” In this chapter, we discussed issues relating
You have risen fast in Lam Tin Industries and are now in charge of purchasing for the entire company. Lam Tin is a privately held company, and negotiations are currently under way for Lam Tin to be acquired by Kwun Tong Company, a large publicly held firm. It is December, and the final negotiations
Under what circumstances does cash flow from operations offer a clearer picture of a company’s performance than does net income?
What criteria must be met for an item to be considered a cash equivalent in preparing a statement of cash flows?
What are the three categories in a statement of cash flows? What types of items are included in each?
What is the normal pattern of cash flow (positive or negative) for operating, investing, and financing activities?
Either the direct method or the indirect method may be used to report cash flows from operating activities. What is the difference in approach for the two methods?
Why do many users prefer the direct method? Why do the majority of preparers prefer the indirect method?
How is depreciation expense handled when the direct method is used? The indirect method?
What is wrong with the statement, “Cash flow is equal to net income plus depreciation”?
Why does the FASB in Statement No. 95 treat interest payments as an operating activity rather than as a financing activity?
When preparing a cash flow statement, what is the “target number”?
When using the direct method, what items must be considered in the calculation of cash paid for inventory purchases?
How is a loss on the sale of a long-term asset treated when using the direct method? The indirect method?
Is the purchase of securities an operating activity or an investing activity? Explain.
What supplemental disclosures are required by FASB Statement No. 95 if a company elects to use the direct method in preparing its statement of cash flows? What disclosures are required if the indirect method is used?
How are significant noncash investing and financing transactions reported in connection with a statement of cash flows?
How is interest paid classified in a statement of cash flows under the provisions of FASB Statement No. 95?
On average, which number is larger, net income or cash from operations? Explain.
What does it mean when the value of a company’s cash flow adequacy ratio is less than 1.0?
The income statement provides detail as to transactions that occurred during the period relating to what balance sheet account? The statement of cash flows provides detail as to the transactions that occurred during the period relating to what balance sheet account?
A forecasted statement of cash flows allows management to plan ahead. What information is contained in the statement that can be used for planning purposes?
How can external users use a forecasted statement of cash flows?
A company reports the following information as of the end of the year. Using the information, determine the total amount of cash and cash equivalents.(a) Investment securities of $10,000. These securities are common stock investments in 30 companies that compose the Dow Jones Industrial average. As
Using the following information, compute cash flow from operating activities, cash flow from investing activities, and cash flow from financingactivities.
Identify which of the following cash flow patterns most likely belongs to(1) A startup high-growth company(2) A steady-state company(3) A cashcow.
Combining the following information, compute the total amount of (1) cash flow from investing activities and (2) cash flow from financing activities.(a) Purchased a building for $120,000. Paid $40,000 and signed a mortgage with the seller for the remaining $80,000.(b) Executed a debt-equity swap:
Organize the following summary information into the proper format for a statement of cash flows.Cash balance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,800Cash flow from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Using the following information, compute cash collected from customers.Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,000Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Refer to the information in Practice 5-6. Compute cash paid for inventory purchases.
Refer to the information in Practice 5-6. Compute cash paid for operating expenses.
Using the following income statement and cash flow adjustment information, prepare the Operating Cash Flow section of the statement of cash flows using the direct method.Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,800Cost of goods sold . . . . .
Refer to Practice 5-9. Prepare the Operating Cash Flow section of the statement of cash flows using the indirect method.
Using the following information, prepare a complete statement of cash flows.(a) Cash balance, beginning $ 1,500(b) Cash paid to purchase inventory 7,800(c) Cash received from sale of a building 5,600(d) Cash paid for interest 450(e) Cash paid to repay a loan
Using the following information, compute cash flow from operating activities. Increase in accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 300Decrease in income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170Depreciation . . . . .
Using the following information, compute cash flow from operating activities. Decrease in inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 300Increase in wages payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170Restructuring charge .
Using the following information, compute cash paid for income taxes.Reported income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . $32,000
Using the following information, compute cash collected from customers.Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,000
Using the following information, compute cash paid for operating expenses.Operating expenses:Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,000Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Using the following information, compute cash paid to purchase property, plant, and equipment.Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,000During the year, property, plant, and equipment with an original cost of $28,000 was sold for a gain
Refer to Practice 5-17. Compute the amount of cash received from the sale of the property, plant, and equipment.
Using the following information, compute cash paid for dividends.Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,000
Using the following information, compute the following ratios: (1) Cash-flow-to-net-income, (2) Cash flow adequacy, and (3) Cash times interest earned.Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,000Cash flow from operating
Use the following information to answer the questions listed below:Dividends declared and paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,000Cash from investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (25,000)Cash
The following balance sheet and income statement information includes actual data for 2011 and forecasted data for 2012:Prepare a forecasted statement of cash flows for 2012. Use the indirect method of reporting cash flow from operatingactivities.
Indicate whether each of the following items would be classified as (1) an operating activity, an investing activity, or a financing activity or (2) as a noncash transaction or noncash item.(a) Cash collected from customers.(b) Cash paid to suppliers for inventory.(c) Cash received for interest on
State how each of the following items would be reflected on a statement of cash flows.(a) Securities classified as available for sale were purchased for $4,200.(b) Buildings were acquired for $210,000, the company paying $60,000 cash and signing an 11% mortgage note, payable in five years, for the
The accountant for Alpine Hobby Stores prepared the following selected information for the year ended December 31, 2011:Equipment with a book value of $18,000 was sold for $16,000 cash. The original cost of the equipment was $21,000. Determine the cash inflows and outflows during 2011 associated
Anakin, Inc., provides the following account balances for 2011 and 2010:Using the format presented in the chapter, prepare the Operating Activities section of the statement of cash flows and present that information using (a) The direct method and (b) The indirectmethod.
Norrington Trading Co. provides the following income statement for 2011:Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $675,400Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
From the following information for Carter Corporation, prepare a statement of cash flows for the year ended December 31, 2011, using the indirect method.Amortization of patent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,000Depreciation expense . . . . . . . . .
The following information was taken from the books of Tapwater Company. Compute the amount of net cash provided by (used in) operating activities during 2011 using the indirectmethod.

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