Fundamentals Of Financial Accounting
6th Edition
ISBN: 9781259864230
Author: PHILLIPS, Fred, Libby, Robert, Patricia A.
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 7, Problem 17ME
Interpreting LCM Financial Statement Note Disclosure
Zumiez Inc. is a leading action sports retailer, focusing on skateboarding, snowboarding, surfing, and BMX, selling some of its merchandise under the Blue Tomato brand. The company’s financial statement notes reported that “Merchandise inventories may include items that have been written down to our best estimate of their net realizable value. Our decisions to write-down our merchandise inventories are based on their current rate of sale, the age of the inventory, the profitability of the inventory and other factors.” What ratios and financial measure(s) discussed in this chapter is the company likely using to monitor …
- a. “… the current rate of sale”?
- b. “… the age of the inventory”?
- c. “… the profitability of the inventory”?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Required information
[The following information applies to the questions displayed below.]
Hemming Company reported the following current-year purchases and sales for its only product.
Date
Date
January 1
January 10
March 14
March 15
July 30
October 5
October 26
a) Cost of Goods Sold using Specific Identification
Available for Sale
January 1
March 14
July 30
October 26
Less:
Equals:
Activities
Beginning inventory
Sales
Purchase
Sales
Purchase
Sales
Purchase
Totals
Activity
Beginning Inventory
Purchase
Purchase
Purchase
# of
units
b) Gross Margin using Specific Identification
Sales
200
350
Hemming uses a periodic inventory system. Ending inventory consists of 45 units from the March 14 purchase, 75 units from the July
30 purchase, and all 100 units from the October 26 purchase. Using the specific identification method, calculate the following.
450
100
1,100
$ 35,200✔
14,075✔
$ 21,125
Cost
Per
Unit
$
450 units
100 units
1,100 units
10.00
$
15.00
$
Units Acquired at Cost
200 units @ $10…
!
Required information
[The following information applies to the questions displayed below.]
Hemming Company reported the following current-year purchases and sales for its only product.
Activities
Beginning inventory
Date
January 1
January 10
March 14
Sales
March 15
July 30
October 5
October 26
Purchase
Sales
Purchase
Sales
Purchase
Totals
a) Cost of Goods Sold using Specific Identification
Available for Sale
Date
January 11
March 14
July 30
October 26
Less:
Equals:
Activity
Beginning Inventory
Purchase
Purchase
Purchase
b) Gross Margin using Specific Identification
# of units
Units Acquired at Cost
@ $11.00 -
@$16.00
225 units
225
340
425
125
1,115
340 units
425 units
125 units
1,115 units
Ending inventory consists of 65 units from the March 14 purchase, 80 units from the July 30 purchase, and all 125 units from the
October 26 purchase. Using the specific identification method, calculate the following.
Cost Per
Unit
@$21.00 -
Ending inventory consists of 65 units from the March 14…
Required information
[The following information applies to the questions displayed below.]
Hemming Company reported the following current-year purchases and sales for its only product.
Activities
Beginning inventory
Sales.
Purchase
Sales
Purchase
Sales
Purchase
Totals
Date
January 1
January 10
March 14
March 15
July 30
October 5
October 26
a) Cost of Goods Sold using Specific Identification
Available for Sale
Date
January 1
March 14
July 30
October 26
Less:
Equals:
Activity
Beginning Inventory
Purchase
Purchase
Purchase
b) Gross Margin using Specific Identification
# of units
260
420
460
160
1,300
Units Acquired at Cost
@$12.40 =
@$17.40 =
260 units.
420 units
460 units
160 units
1,300 units
Cost
Per
Unit
$ 12.40
$17.40
$22.40
$ 27.40
3
@ $22.40
# of
units
sold
@$27.40
Ending inventory consists of 45 units from the March 14 purchase, 75 units from the July 30 purchase, and all 160 units from the
October 26 purchase. Using the specific identification method, calculate the following.
=
0…
Chapter 7 Solutions
Fundamentals Of Financial Accounting
Ch. 7 - What are three goals of inventory management?Ch. 7 - Describe the specific types of inventory reported...Ch. 7 - The chapter discussed four inventory costing...Ch. 7 - Which inventory cost flow method is most similar...Ch. 7 - Where possible, the inventory costing method...Ch. 7 - Contrast the effects of LIFO versus FIFO on ending...Ch. 7 - Contrast the income statement effect of LIFO...Ch. 7 - Several managers in your company are experiencing...Ch. 7 - Explain briefly the application of the LCM rule to...Ch. 7 - Prob. 10Q
Ch. 7 - You work for a made-to-order clothing company,...Ch. 7 - Prob. 12QCh. 7 - (Supplement 7B) Explain why an error in ending...Ch. 7 - Which of the following statements are true...Ch. 7 - The inventory costing method selected by a company...Ch. 7 - Which of the following is not a name for a...Ch. 7 - Which of the following correctly expresses the...Ch. 7 - A New York bridal dress designer that makes...Ch. 7 - If costs are rising, which of the following will...Ch. 7 - Which inventory method provides a better matching...Ch. 7 - Which of the following regarding the lower of cost...Ch. 7 - An increasing inventory turnover ratio a....Ch. 7 - In which of the following situations is an LCM/NRV...Ch. 7 - Matching Inventory Items to Type of Business Match...Ch. 7 - Reporting Goods in Transit Abercrombie Fitch Co....Ch. 7 - Prob. 3MECh. 7 - Reporting Inventory-Related Accounts in the...Ch. 7 - Matching Financial Statement Effects to Inventory...Ch. 7 - Matching Inventory Costing Method Choices to...Ch. 7 - Calculating Cost of Goods Available for Sale,...Ch. 7 - Calculating Cost of Goods Available for Sale,...Ch. 7 - Calculating Cost of Goods Available for Sale,...Ch. 7 - Prob. 10MECh. 7 - Calculating Cost of Goods Available for Sale, Cost...Ch. 7 - Calculating Cost of Goods Available for Sale, Cost...Ch. 7 - Calculating Cost of Goods Available for Sale, Cost...Ch. 7 - Reporting Inventory under Lower of Cost or...Ch. 7 - Preparing the Journal Entry to Record Lower of...Ch. 7 - Determining the Effects of Inventory Management...Ch. 7 - Interpreting LCM Financial Statement Note...Ch. 7 - Calculating the Inventory Turnover Ratio and Days...Ch. 7 - Prob. 19MECh. 7 - Prob. 20MECh. 7 - Prob. 21MECh. 7 - (Supplement 7A) Calculating Cost of Goods Sold and...Ch. 7 - (Supplement 7B) Determining the Financial...Ch. 7 - Prob. 24MECh. 7 - Reporting Goods in Transit and Consignment...Ch. 7 - Determining the Correct Inventory Balance Seemore...Ch. 7 - Determining the Correct Inventory Balance Seemore...Ch. 7 - Calculating Cost of Ending Inventory and Cost of...Ch. 7 - Calculating Cost of Ending Inventory and Cost of...Ch. 7 - Prob. 6ECh. 7 - Analyzing and Interpreting the Financial Statement...Ch. 7 - Evaluating the Effects of Inventory Methods on...Ch. 7 - Choosing LIFO versus FIFO When Costs Are Rising...Ch. 7 - Using FIFO for Multiproduct Inventory Transactions...Ch. 7 - Reporting Inventory at Lower of Cost or Market/Net...Ch. 7 - Reporting Inventory at Lower of Cost or Market/Net...Ch. 7 - Analyzing and Interpreting the Inventory Turnover...Ch. 7 - Analyzing and Interpreting the Effects of the...Ch. 7 - Prob. 15ECh. 7 - Analyzing and Interpreting the Financial Statement...Ch. 7 - Prob. 17ECh. 7 - Analyzing the Effects of Four Alternative...Ch. 7 - Evaluating the Income Statement and Income Tax...Ch. 7 - Calculating and Interpreting the Inventory...Ch. 7 - Prob. 4CPCh. 7 - (Supplement 7B) Analyzing and Interpreting the...Ch. 7 - Analyzing the Effects of Four Alternative...Ch. 7 - Evaluating the Income Statement and Income Tax...Ch. 7 - Prob. 3PACh. 7 - Prob. 4PACh. 7 - (Supplement 7B) Analyzing and Interpreting the...Ch. 7 - Prob. 1PBCh. 7 - Prob. 2PBCh. 7 - Prob. 3PBCh. 7 - Prob. 4PBCh. 7 - (Supplement 7B) Analyzing and Interpreting the...Ch. 7 - Prob. 1COPCh. 7 - (Supplement 7A) Recording Inventory Transactions,...Ch. 7 - (Supplement 7A) Recording Inventory Purchases,...Ch. 7 - (Supplement 7A) Recording Inventory Purchases,...Ch. 7 - Prob. 5COPCh. 7 - Prob. 6COPCh. 7 - Prob. 7COPCh. 7 - Prob. 8COPCh. 7 - Prob. 9COPCh. 7 - Prob. 10COPCh. 7 - Prob. 11COPCh. 7 - Prob. 12COPCh. 7 - Prob. 1SDCCh. 7 - Prob. 2SDCCh. 7 - Critical Thinking: Income Manipulation under the...Ch. 7 - Accounting for Changing Inventory Costs In...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Comparative Analysis: Under Armour, Inc., vs. Columbia Sportswear Refer to the 10-K reports of Under Armour, Inc., and Columbia Sportswear that are available for download from the companion website at CengageBrain.com. Required: What amount does Under Armour report for cost of goods sold for the years ending December 2016, 2015, and 2014? What amount does Columbia report for cost of goods sold for the years ending December 2016, 2015, and 2014?arrow_forwardRequired information [The following information applies to the questions displayed below.] Hemming Company reported the following current-year purchases and sales for its only product. Activities Beginning inventory Sales Purchase Sales Purchase Sales Purchase Totals Date January 1 January 10 March 14 March 15 July 30 October 5 October 26 a) Cost of Goods Sold using Specific Identification Available for Sale Date January 1 March 14 July 30 October 26 Less: Equals: Activity Beginning Inventory Purchase Purchase Purchase b) Gross Margin using Specific Identification # of units Units Acquired at Cost 300 units @ $14.00 = @ $19.00 = @ $24.00 = @ $29.00 = 300 520 500 200 1,520 520 units 500 units 200 units 1,520 units Ending inventory consists of 50 units from the March 14 purchase, 80 units from the July 30 purchase, and all 200 units from the October 26 purchase. Using the specific identification method, calculate the following. Cost Per # of units Unit sold MITSTRA 480 units @ $44.00 @…arrow_forward[The following information applies to the questions displayed below.] Toys "R" Us sells a variety of children's toys, games, books, and accessories. Assume that a local store has the following amounts for the month of March 2021. $75,300 6,000 3,900 7,100 Sales revenue Advertising expense Rent expense Gain on sale of building Inventory (Mar. 1, 2021) Cost of goods sold Inventory (Mar. 31, 2021) Insurance expense Sales discounts Salaries expense $1,100 2,100 2,800 9,000 3,800 Income tax expense 2,600 35,600 Required: 1. Prepare a multiple-step income statement for the month ended March 31, 2021. TOYS "R" US Multiple-step lIncome Statement For the month of March 2021 Net sales: Total sales revenue Net sales revenuearrow_forward
- Question: Comfort Solutions sells a wide range of mattresses to consumers. For the most recent year, Comfort Solutions provided the following data: Beginning inventory $2,450,000 Purchases $23,125,000 Ending inventory Transportation in $2,225,000 $511,500 Comfort Solutions informs you that it has traditionally treated transportation in as a period expense. However, the firm has a new auditor this year. The auditor believes that the cost of transportation in should be treated as a product cost and, as such, should flow through the firm's inventory account. Required: a. What is Comfort's cost of goods sold under its current (traditional) system? b. Assume the auditor asks Comfort to allocate the cost of transportation in between cost of goods sold (as computed in part (a)) and ending inventory. Using this approach, what is Comfort's cost of goods sold? c. Which approach, (a) or (b), do you believe is most appropriate for Comfort Solutions?arrow_forwardComputing cost of goods sold in a periodic inventory system Clink Electric uses the periodic inventory system. Clink reported the following selected amounts at May 31, 2018: Compute the following for Clink: a. Cost of goods sold. b. Gross profit.arrow_forwardAllocating Transaction Price to Performance Obligations and Recording Sales Maximum Inc. (retailer) has a loyalty program that rewards its customers one point per $1 spent. Points are redeemable for $0.20 off future purchases. A customer purchases products (cost of $196) for cash at the usual selling price of $280 and earns 280 points redeemable for $56 off future purchases of goods or services. The retailer expects redemption of 252 points or 90% of points earned. Required a. How should the transaction price be allocated among the performance obligation(s)? *Note: Carry all decimals in calculations; round the final answer to the nearest dollar. Performance Obligations Product purchase s Loyalty rewards Total Transaction Price as stated Account Name To record sale of product. 280 ✔ S To record cost of sale of product. 280 S b. Prepare Maximum's journal entry to record the $280 sale to the customer and the cost of that sale where the customer earned 280 loyalty points. *Note: If a…arrow_forward
- The dollar amount paid by a retailer to acquire a product from a wholesaler is known as the retailer's expenses cost MSRP markuparrow_forwardBeginning inventory, purchases, and sales data for portable game players are as follows: The business maintains a perpetual inventory system, costing by the first-in, first-out method. a. Determine the cost of the merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 3. b. Based upon the preceding data, would you expect the inventory to be higher or lower using the last-in, first-out method?arrow_forwardPreparing an income statement and calculating unit cost for a merchandising company Dillon Young owns Dillon’s Pets, a small retail shop selling pet supplies. On December 31, 2018, the accounting records for Dillon’s Pets showed the following: Requirements Prepare an income statement for Dillon’s Pets for the year ended December 31, 2018. Dillon’s Pets sold 5,550 units. Determine the unit cost of the merchandise sold, rounded to the nearest cent.arrow_forward
- Match each defınition with the term that best describes it. An income measure that includes gains and [ Choose ] [Choose ] Sales revenue (Sales) Expenses incurred in the process of earning sales revenue. losses that are excluded from the determination of net income. An account that is offset against a revenue Contra revenue account account on the income statement. Cost of goods sold Periodic inventory system FOB destination The total cost of merchandise sold during the Comprehensive income FOB shipping point Perpetual inventory system period. An inventory system under which the [ Choose ] company does not keep detailed inventory records throughout the accounting period but determines the cost of goods sold only at the end of an accounting period. An inventory system under which the [ Choose ] company keeps detailed records of the cost of each inventory purchase and sale, and the records continuously show the inventory that should be on hand. The primary source of revenue in a [ Choose…arrow_forwardUse Exhibit 18-1 to determine the sales tax (in $) and calculate the total purchase price (in $) for the item. (Round your answers to the nearest cent.) Item SellingPrice SalesTax TotalPurchase Price Hair dryer $19.22arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning
Excel Applications for Accounting PrinciplesAccountingISBN:9781111581565Author:Gaylord N. SmithPublisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Financial Accounting
Accounting
ISBN:9781337272124
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning
Excel Applications for Accounting Principles
Accounting
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Cengage Learning
Revenue recognition explained; Author: The Finance Storyteller;https://www.youtube.com/watch?v=816Q6pOaGv4;License: Standard Youtube License