Breif Excercise-Inventory

Breif Excercise-Inventory

Midori Company had ending inventory at end-of-year prices of $138,500 at December 31, 2013; $165,771 at December 31, 2014; and $181,366 at December 31, 2015. The year-end price indexes were 100 at 12/31/13, 113 at 12/31/14, and 118 at 12/31/15.
 

Compute the ending inventory for Midori Company for 2013 through 2015 using the dollar-value LIFO method.

    

2013

 

2014

 

2015

 

Ending Inventory

 

$138,500 

 

$147,766 

 

$156,026

 

     

Brief   Exercise 8-9

  

 

 

 

 

Your     answer is correct. 

Arna, Inc. uses the dollar-value   LIFO method of computing its inventory. Data for the past 3 years follow.

  

Year Ended 
December 31

 

Inventory at
Current-Year Cost

 

Price
Index

 

2013

 

$20,000

 

100

 

2014

 

22,363

 

107

 

2015

 

26,656

 

112

   Compute the value of the 2014 and 2015 inventories using the dollar-value   LIFO method.

    

2014

 

2015

 

Inventory     under LIFO

 

$20,963 

 

$24,211 

 

 

       

Ann M. Martin Company makes the following errors during the current year. (In all cases, assume ending inventory in the following year is correctly stated.)

  

1.

 

Ending inventory is overstated,   but purchases and related accounts payable are recorded correctly.

 

2.

 

Both ending inventory and   purchases and related accounts payable are understated. (Assume this purchase   was recorded and paid for in the following year.)

 

3.

 

Ending inventory is correct, but a   purchase on account was not recorded. (Assume this purchase was recorded and   paid for in the following year.)

 Indicate the effect of each of these errors on working capital, current ratio (assume that the current ratio is greater than 1), retained earnings, and net income for the current year and the subsequent year.

      

Current   Year

 

Subsequent   Year

 

1.

 

Working capital

 

Overstated

 

No effect

   

Current ratio

 

Overstated

 

No effect

   

Retained earnings

 

Overstated

 

No effect

   

Net income

 

Overstated

 

Understated

 

 

2.

 

Working capital

 

No effect

 

No effect

   

Current ratio

 

Overstated

 

No effect

   

Retained earnings

 

No effect

 

No effect

   

Net income

 

No effect

 

No effect

 

 

3.

 

Working capital

 

Overstated

 

No effect

   

Current ratio

 

Overstated

 

No effect

   

Retained earnings

 

Overstated

 

No effect

   

Net income

 

Overstated

 

Understated

    and other questions

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