Basista Corporation manufactures three models of gear shift components for bicycles that are sold to bicycle manufacturers,
Question:
Basista Corporation manufactures three models of gear shift components for bicycles that are sold to bicycle manufacturers, retailers, and catalog outlets. Since beginning operations in 1944, Basista has used normal absorption costing and has assumed a first-in, first-out cost flow in its perpetual inventory system. Except for overhead, manufacturing costs are accumulated using actual costs. Overhead is applied to production using predetermined overhead rates. The balances of the inventory accounts at December 31, 2010 are shown below. The inventories are stated at cost before any year-end adjustments.
Finished goods | P2,588,000 |
Work-in-process | 450,000 |
Raw materials | 960,000 |
Factory supplies | 276,000 |
The following information relates to Basista’s inventory and operations.
- The finished goods inventory consists of the items analyzed below.
Cost | NRV | |
Down tube shifter | P1,080,000 | P1,056,000 |
Bar end shifter | 728,000 | 750,400 |
Head tube shifter | 780,000 | 787,800 |
Total | P2,588,000 | P2,594,200 |
- One-half of the head tube shifter finished goods inventory is held by catalog outlets on consignment.
- Three-quarters of the bar end shifter finished goods inventory has been pledged as collateral for a bank loan.
- One-half of the raw materials balance was acquired at a contracted price 20 percent above the current market price. The replacement cost of the rest of the raw materials is P509,600.
- The net realizable value of the work-in-process inventory is P434,800.
- Included in the cost of factory supplies are obsolete items with a historical cost of P16,800. The replacement cost of the remaining factory supplies is P263,600.
- Basista applies the lower of cost or NRV rule to each of the three types of shifters in finished goods inventory. For each of the other inventory accounts, Basista applies the lower of cost or NRV method to the total of each inventory account.
Based on the above and the result of your audit, answer the following:
1. The finished goods inventory on December 31, 2010 should be valued at
2. The raw materials inventory on December 31, 2010 should be valued at
3. The factory supplies inventory on December 31, 2010 should be valued at
4. The total inventories to be recognized in the statement of financial position as of December 31, 2010 is
Expert Answer:
Given Cost before any year end adjustment Finished goods P2588000 Workinproc... View the full answer
