LIFO was designed to protect cash flow in industries where prices increase rapidly. It has been used for both tax and financial statement reporting since the 1930s. The higher cost of goods sold under LIFO in these circumstances results in lower reported profit than under FIFO. In the 2012 budget, President Obama has threatened to repeal LIFO. If Exxon uses FIFO for its inventory valuation, calculate the cost of ending inventory and cost of goods sold if ending inventory is 110 barrels of crude oil: Beginning inventory and purchases Barrels Barrel cost Total cost January 1 135 $ 96 $ 12,960 March 1 60 102 6,120 June 1 75 99 7,425 September 1 85 91 7,735 December 1 60 104 6,240 415 $ 40,480 Cost of ending inventory Cost of goods sold

LIFO was designed to protect cash flow in industries where prices increase rapidly. It has been used for both tax and financial statement reporting since the 1930s. The higher cost of goods sold under LIFO in these circumstances results in lower reported profit than under FIFO. In the 2012 budget, President Obama has threatened to repeal LIFO. If Exxon uses FIFO for its inventory valuation, calculate the cost of ending inventory and cost of goods sold if ending inventory is 110 barrels of crude oil: Beginning inventory and purchases Barrels Barrel cost Total cost January 1 135 $ 96 $ 12,960 March 1 60 102 6,120 June 1 75 99 7,425 September 1 85 91 7,735 December 1 60 104 6,240 415 $ 40,480 Cost of ending inventory Cost of goods sold

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter11: Depreciation, Depletion, Impairment, And Disposal

Section: Chapter Questions

Problem 5C: The following two statements concern depreciation: 1. Because our plant was shut down for part of...

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LIFO was designed to protect cash flow in industries where prices increase rapidly. It has been used for both tax and financial statement reporting since the 1930s. The higher cost of goods sold under LIFO in these circumstances results in lower reported profit than under FIFO. In the 2012 budget, President Obama has threatened to repeal LIFO. If Exxon uses FIFO for its inventory valuation, calculate the cost of ending inventory and cost of goods sold if ending inventory is 100 barrels of crude oil: Beginning inventory and purchasesBarrelsBarrel costTotal costJanuary 1120$ 94$ 11,280March 1451034,635June 160975,820September 170926,440December 1451024,590 340 $ 32,765. What is the cost of ending inventory: ? What is the cost of goods sold: ?
A corporation has an excess input VAT due to its excessive local purchases of goods and services. This excess input VAT is accumulating every month and reached a significant value. The management is considering to deal with the excess input VAT. Assume that the excess input VAT is directly attributable to its Zero-rated VAT Sales, explain the options that could possibly be considered by the management.
II. Jerry Prior, Beeler Corporation’s controller, is concerned that net income may be lower this year. He is afraid upper-level management might recommend cost reductions by laying off accounting staff including him. Prior knows that depreciation is a major expense for Beeler. The company currently uses the double-declining-balance method for both financial reporting and tax purposes, and he’s thinking of selling equipment that, given its age, is primarily used when there are periodic spikes in demand. The equipment has a carrying value of $2,000,000 and a fair value of $2,180,000. The gain on the sale would be reported in the income statement. He doesn’t want to highlight this method of increasing income. He thinks, “Why don’t I increase the estimated useful lives and the salvage values? That will decrease depreciation expense and require less extensive disclosure, since the changes are accounted for prospectively. I may be able to save my job and those of my staff.” Instructions…
Jerry Prior, Beeler Corporation’s controller, is concerned that net income may be lower this year. He is afraid upper-level management might recommend cost reductions by laying off accounting staff, including him. Prior knows that depreciation is a major expense for Beeler. The company currently uses the double-declining-balance method for both financial reporting and tax purposes, and he’s thinking of selling equipment that, given its age, is primarily used when there are periodic spikes in demand. The equipment has a carrying value of $2,000,000 and a fair value of $2,180,000. The gain on the sale would be reported in the income statement. He doesn’t want to highlight this method of increasing income. He thinks, “Why don’t I increase the estimated useful lives and the salvage values? That will decrease depreciation expense and require less extensive disclosure, since the changes are accounted for prospectively. I may be able to save my job and those of my staff.” Instructions Answer…
As the world reports on inflation, companies are taking steps to adjust their prices and manage their resources. Citizens are worried that prices will increase to a level that is difficult. Atten’tive Corporation is a private corporation formed since 2000 for the purpose of selling products to local and regional economies. The government has consulted with Atten’tive for assistance with providing cheaper product options. As at January 2005, they switched to Activity Based Costing System and has been using it ever since. Due to the switch in costing methods, Atten’tive Company used multiple cost drivers, which has a direct cause/effect relationship in its applied overhead costs. This method allows for a better accounting of costs, which may invariably have transferred out and therefore reduce some manufacturing costs. The Chief Operating Officer held a meeting with all Department Heads on their operational budgets and to present a cash flow position of the company among other schedules.…
The following two statements concern depreciation: 1. Because our plant was shut down for part of the year, we will not depreciate it. Depreciating it for the full year would increase our costs and overstate the inventory. 2. I think we should have increasing depreciation expense each period because it will increase the funds recovered near the end of the assets life when maintenance costs are high and we will need to replace the asset. Also, I think tax rates will be higher toward the end of the assets life, so we will be better off to have a larger amount of depreciation expense then. Required: Prepare a short report that evaluates each of the following statements separately.
Abercrombie & Fitch, once the favorite of loyal teens, is considering lowering prices on all items it sells in an effort to win them back after several years of sales declines. A&F’s total sales were $4 billion last year, but they have been declining in the face of a weak economy and an intensively competitive retail environment. Price reductions are often effective in increasing sales, but marketers need to analyze how much sales must go up before a price reduction pays off and increases revenue enough to make the it worth doing. By what percentage must costs decrease if A&F wants to maintain the gross margin percentage of 60 percent?
Abercrombie & Fitch, once the favorite of loyal teens, is considering lowering prices on all items it sells in an effort to win them back after several years of sales declines. A&F’s total sales were $4 billion last year, but they have been declining in the face of a weak economy and an intensively competitive retail environment. Price reductions are often effective in increasing sales, but marketers need to analyze how much sales must go up before a price reduction pays off and increases revenue enough to make the it worth doing. Assuming A&F’s gross profit margin is 60 percent and cost of goods sold represents the only variable cost, by how much must sales increase to maintain the same gross profit margin in terms of absolute dollars if A&F lowers prices by 10 percent?
Horizon Corporation manufactures personal computers. The company began operations in 2012 and reported profits for the years 2012 through 2019. Due primarily to increased competition and price slashing in the industry, 2020’s income statement reported a loss of $20 million. Just before the end of the 2021 fiscal year, a memo from the company’s chief financial officer (CFO) to Jim Fielding, the company controller, included the following comments:If we don’t do something about the large amount of unsold computers already manufactured, our auditors will require us to record a write-down. The resulting loss for 2021 will cause a violation of our debt covenants and force the company into bankruptcy. I suggest that you ship half of our inventory to J.B. Sales, Inc., in Oklahoma City. I know the company’s president, and he will accept the inventory and acknowledge the shipment as a purchase. We can record the sale in 2021 which will boost our loss to a profit. Then J.B. Sales will simply…
Explain why proponents of LIFO argue that it provides a better match of revenue and expenses. In what situations would it not provide a better match? Be specific. The management of the Esquire Oil Company believes that the wholesale price of heating oil that they sell to homeowners will increase again as the result of increased political problems in the Middle East. The company is currently paying $0.80 per gallon. If they are willing to enter an agreement in November 2021 to purchase a million gallons of heating oil during the winter of 2022, their supplier will guarantee the price at $0.80 per gallon. However, if the winter is a mild one, Esquire would not be able to sell a million gallons unless they reduced their retail price and thereby increase the risk of a loss for the year. On the other hand, if the wholesale price did increase substantially, they would be in a favorable position with respect to their competitors. The company’s fiscal year-end is December 31. Discuss the…
Horizon Corporation manufactues personal computers. The company began operations in 2012 and reported profits for the years 2012 through 2019. Due primarily to increased competition and price slashing in the industry, 2020's income statement reported a loss of $20 million. Just before the end of 2021 fiscal year, a memo from the company's chief financial officer (CFO) to Jim Fielding, the company controller, included the following comments: "If we dont do something about the large amount of unsold computers already manufactured, our auditors will require us to record a write-down. The resulting loss for 2021 will cause a violation of our debt convenants and force the company into bankruptcy. I suggest that you ship half of out inventory to J.B. Sales, Inc., in Oklahoma City. I know the company's presdient, and he will accept the inventory and acknowledge the shipment as a purchase. We can record the sale in 2021 which will boost our loss to a profit. Then J.B. Sales will simply return…
2. The Coldmarket government is considering several excise taxes on wool. They need to generate at least $1,150 in revenue to fund the construction of the fort, but they also wish to minimize the loss of surplus to consumers and producers. They are considering the following excise tax amounts: $1.50 $3.00 $4.50 $6.00