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9.16. BRIEF EXERCISES

BE9-1 Presented below is information related to Rembrandt Inc.'s inventory.



Determine the following: (a) the two limits to market value (i.e., the ceiling and the floor) that should be used in the lower-of-cost-or-market computation for skis; (b) the cost amount that should be used in the lower-of-cost-or-market comparison of boots; and (c) the market amount that should be used to value parkas on the basis of the lower-of-cost-or-market.

BE9-2 Floyd Corporation has the following four items in its ending inventory.



Determine the final lower-of-cost-or-market inventory value for each item.

BE9-3 Kumar Inc. uses a perpetual inventory system. At January 1, 2011, inventory was $214,000 at both cost and market value. At December 31, 2011, the inventory was $286,000 at cost and $265,000 at market value. Prepare the necessary December 31 entry under (a) the direct method and (b) the indirect method.

BE9-4 Bell, Inc. buys 1,000 computer game CDs from a distributor who is discontinuing those games. The purchase price for the lot is $8,000. Bell will group the CDs into three price categories for resale, as indicated below.



Determine the cost per CD for each group, using the relative sales value method.

BE9-5 Kemper Company signed a long-term noncancelable purchase commitment with a major supplier to purchase raw materials in 2011 at a cost of $1,000,000. At December 31, 2010, the raw materials to be purchased have a market value of $950,000. Prepare any necessary December 31 entry.

BE9-6 Use the information for Kemper Company from BE9-5. In 2011, Kemper paid $1,000,000 to obtain the raw materials which were worth $950,000. Prepare the entry to record the purchase.

BE9-7 Fosbre Corporation's April 30 inventory was destroyed by fire. January 1 inventory was $150,000, and purchases for January through April totaled $500,000. Sales for the same period were $700,000. Fosbre's normal gross profit percentage is 35% on sales. Using the gross profit method, estimate Fosbre's April 30 inventory that was destroyed by fire.

BE9-8 Boyne Inc. had beginning inventory of $12,000 at cost and $20,000 at retail. Net purchases were $120,000 at cost and $170,000 at retail. Net markups were $10,000; net markdowns were $7,000; and sales were $147,000. Compute ending inventory at cost using the conventional retail method.

BE9-9 In its 2007 annual report, Wal-Mart reported inventory of $33,685 million on January 31, 2007, and $31,910 million on January 31, 2006, cost of sales of $264,152 million for fiscal year 2007, and net sales of $344,992 million. Compute Wal-Mart's inventory turnover and the average days to sell inventory for the fiscal year 2007.

*BE9-10 Use the information for Boyne Inc. from BE9-8. Compute ending inventory at cost using the LIFO retail method.

*BE9-11 Use the information for Boyne Inc. from BE9-8, and assume the price level increased from 100 at the beginning of the year to 115 at year-end. Compute ending inventory at cost using the dollar-value LIFO retail method.


  

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