Ask Accounting Basics Expert

Company models three models of gear shiftcomponents for bycycles that are sold to cicycle mfr, retailers and catalog outlets. Company since 1975 has used normal absorption costing and has assumed a FIFO cost flow in itsperpetual inventory system. Below is the balance of inventory at fiscal year end November 30, 2007. inventories are stated at costbefore any year end adjustments.

Finished goods $647,000
Work-in-process 112,500
Raw materials 240,000
Factory supplies 69,000

1.

Below is the inventory and operations on finished goods whichare analyzed below.                                 

                                      Cost         Market

Down tube shifter

standardmodel           $67,500      $67,000

Click adj model            94,500       87,000

Deluxemodel               108,000     110,000

Total tubeshifter         270,000      264,000

Bar end shifter

Standardmodel            $83,000     90,500

Click adj model              99,000      97,550

Total bar endshfter       182,000   187,600

Head tube shifter

Standardmodel         78,000      77,650

Click adjmodel          117,000     119,300

Total head tubeshft   195,000   196,950

Total finishedgoods   $647,000   $648,550

2. One half of the head tube shifter finished goods inventoryis held by catalog outlets on consignment.

3. Three quarters of the bar end shifter finished goodsinventory has been pledged as collateral for a bank loan.

4. One half of the raw materials balance represents derailleurs acquired at a contracted price 20 percent above the current market price. The market value of the rest of the rawmaterials is $127,400.

5. The total market value of the work in process inventory is$108,700.

6. Included in the cost of factory supplies are obsolete itemswith an historical cost of $4,200. The market value of theremaining factory supplies is $65,900.

7. Company applies the lower of cost or market method to eachof the three types of shifters in finished goods inventory. Foreach of the other three inventory accounts, company applies thelower of cost or market method to the total of each inventoryaccount.
8. Consider all amounts presented above to be material inrelation to the Company's financial statements taken as awhole.

INSTRUCTIONS:

A. Prepare the inventory section of the company's balancesheet as of November 30, 2007 including any required notes.

B. Without prejudice to your answer (a) assume that the marketvalue of the inventories is less than cost. Explain how the declinewould be presented on the company's invome statement for the fiscalyear end November 30, 2007.

C. Assume the company has a firm purchase commitment for thesame type of derailleur included in the raw materials inventory asof November 30, 2007 and that the purchase commitment is at acontracted price 15% greater than the current market price. Thesederailleurs are to be delivered to the company after November 30,2007. Discuss the impact, if any, that this purchase commitmentwould have on the company's financial statements prepared for thefiscal year ended November 30, 2007.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M9796970

Have any Question?


Related Questions in Accounting Basics

Question what discoveries have you made in your research

Question: What discoveries have you made in your research and how does this information inform your ability to evaluate effective coaching and its impact on organizations? Consider these guiding questions: 1. What core c ...

Question requirement 1 read the article in below attachment

Question: Requirement: 1. Read the article in below attachment, and answer the questions in a paper format. Read below requirements before your writing! 2. Not to list the answers, and you should write as a paper format. ...

Question as a financial consultant you have contracted with

Question: As a financial consultant, you have contracted with Wheel Industries to evaluate their procedures involving the evaluation of long term investment opportunities. You have agreed to provide a detailed report ill ...

Question the following information is taken from the

Question: The following information is taken from the accrual accounting records of Kroger Sales Company: 1. During January, Kroger paid $9,150 for supplies to be used in sales to customers during the next 2 months (Febr ...

Assignment 1 lasa 2-capital budgeting techniquesas a

Assignment 1: LASA # 2-Capital Budgeting Techniques As a financial consultant, you have contracted with Wheel Industries to evaluate their procedures involving the evaluation of long term investment opportunities. You ha ...

Assignment 2 discussion questionthe finance department of a

Assignment 2: Discussion Question The finance department of a large corporation has evaluated a possible capital project using the NPV method, the Payback Method, and the IRR method. The analysts are puzzled, since the N ...

Question in this case you have been provided financial

Question: In this case, you have been provided financial information about the company in order to create a cash budget. Management is seeking advice or clarification on three main assumptions the company has been operat ...

Question 1what step in the accounting cycle do adjusting

Question: 1. What step in the accounting cycle do Adjusting Entries show up 2. How do these relate to the Accounting Worksheet? 3. Why are they completed at the end of each accounting period? The response must be typed, ...

Question is it important for non-accountants to understand

Question: Is it important for non-accountants to understand how to read financial statements? If you are not part of the accounting/finance function in a business what difference would it make? The response must be typed ...

Question refer to the hat rack cash flow statement 2002 in

Question: Refer to the Hat Rack Cash Flow Statement, 2002 in the text on page 17. Answer the following questions and submit to me via Canvas by the due date. 1. Cash flow from operations? 2. Cash flow from investing? 3. ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Why might a bank avoid the use of interest rate swaps even

Why might a bank avoid the use of interest rate swaps, even when the institution is exposed to significant interest rate

Describe the difference between zero coupon bonds and

Describe the difference between zero coupon bonds and coupon bonds. Under what conditions will a coupon bond sell at a p

Compute the present value of an annuity of 880 per year

Compute the present value of an annuity of $ 880 per year for 16 years, given a discount rate of 6 percent per annum. As

Compute the present value of an 1150 payment made in ten

Compute the present value of an $1,150 payment made in ten years when the discount rate is 12 percent. (Do not round int

Compute the present value of an annuity of 699 per year

Compute the present value of an annuity of $ 699 per year for 19 years, given a discount rate of 6 percent per annum. As