) At which amount should Barilgaon’s raw materials inventory be reported on the statement of financial position? Why? ii) In general, why is the LCNRV rule used to report inventory? iii) What would have been the effect on ending inventory and cost of goods sold had Barilgaon used the average-cost inventory method instead of the FIFO inventory method for the raw materials? Why?
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Barilgaon Company purchased a significant amount of raw materials inventory for a new product
that it is manufacturing. It uses the LCNRV rule for these raw materials. The net realizable value
of the raw materials is below the original cost. Barilgaon uses the FIFO inventory method for these
raw materials. In the last 2 years, each purchase has been at a lower price than the previous
purchase, and the ending inventory quantity for each period has been higher than the beginning
inventory quantity for that period.
Required:
i) At which amount should Barilgaon’s raw materials inventory be reported on the
financial position
ii) In general, why is the LCNRV rule used to report inventory?
iii) What would have been the effect on ending inventory and cost of goods sold had Barilgaon
used the average-cost inventory method instead of the FIFO inventory method for the raw
materials? Why?
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- gala Corporation purchased a significant amount of raw materials inventory for a new product that it is manufacturing. Ogala uses the LCNRV rule for these raw materials. The net realizable value of the raw materials is below the original cost. Ogala uses the FIFO inventory method for these raw materials. In the last 2 years, each purchase has been at a lower price than the previous purchase, and the ending inventory quantity for each period has been higher than the beginning inventory quantity for that period. Instructions a. At which amount should Ogala’s raw materials inventory be reported on the balance sheet? Why? b. In general, why is the LCNRV rule used to report inventory? c. What would have been the effect on ending inventory and cost of goods sold had Ogala used the average-cost inventory method instead of the FIFO inventory method for the raw materials? Why?Ogala Corporation purchased a significant amount of raw materials inventory for a new product that it is manufacturing. Ogala uses the LCNRV rule for these raw materials. The net realizable value of the raw materials is below the original cost.Ogala uses the FIFO inventory method for these raw materials. In the last 2 years, each purchase has been at a lower price than the previous purchase, and the ending inventory quantity for each period has been higher than the beginning inventory quantity for that period.Instructions(a) At which amount should Ogala’s raw materials inventory be reported on the balance sheet? Why?(b) In general, why is the LCNRV rule used to report inventory?(c) What would have been the effect on ending inventory and cost of goods sold had Ogala used the average-cost inventory method instead of the FIFO inventory method for the raw materials? Why?Steele Corporation purchased a significant amount of raw materials inventory for a new product that it is manufacturing. Steele uses the lower-of-average-cost-or-net realizable value (LCNRV) rule for these raw materials. The net realizable value of the raw materials is below the original cost. In the last 2 years, each purchase has been at a lower price than the previous purchase, and the ending inventory quantity for each period has been higher than the beginning inventory quantity for that period. Instructions a. 1. At which amount should Steele’s raw materials inventory be reported on the balance sheet? Why? 2. In general, why is the LCNRV rule used to report inventory? b. What would have been the effect on ending inventory and cost of goods sold had Steele used the LIFO inventory method instead of the average-cost inventory method for the raw materials? Why?
- The balance of inventory account as of December 31 of the current year of Mark Company amounted to P480,000. The replacement cost of the raw materials is P450,000. Assume that the finished products in which raw materials will be incorporated are expected to be sold at or above cost, a.compute for the loss on inventory writedown. b.Refer to given above but assume instead that the finished products in which raw materials will be incorporated are expected to be sold at lower than cost. Compute for loss on inventory writedown. Your answerMannisto Inc. uses the FIFO inventory cost flow assumption. In a year of rising costs and prices, the firm reported net income of $224,988 and average assets of $1,558,950. If Mannisto had used the LIFO cost flow assumption in the same year, its cost of goods sold would have been $43,570 more than under FIFO, and its average assets would have been $42,390 less than under FIFO. Required: a. Calculate the firm's ROI under each cost flow assumption (FIFO and LIFO). (Enter your answers as percentages rounded to 1 decimal place (i.e., 12.2%).) b. Suppose that two years later costs and prices were falling. Under FIFO, net income and average assets were $268,168 and $1,893,070, respectively. If LIFO had been used through the years, inventory values would have been $41,250 less than under FIFO, and current year cost of goods sold would have been $15,419 less than under FIFO. Calculate the firm's ROI under each cost flow assumption (FIFO and LIFO). (Enter your answers as percentages…Bryant Company had the following inventory at the end of the year: Valves: Model Q Model R Model S Gaskets: Model Alpha Model Beta Model Gamma Quantity Cost of Ending Inventory: 190 130 200 $0 90 50 30 Unit Price Cost $10 7 8 65 60 100 Market $12 5 10 Bryant Company uses the lower of cost or market method (LCM) to value its inventory. Required: Determine the cost of ending inventory by using the lower of cost or market method applied to each item of inventory. 60 65 105
- During a recession, a manufacturing company using a perpetual inventory system wrote down its inventory that cost $5.0 million to the net realizable value of $4.5 million. Two years later this inventory was still available for sale; however, its net realizable value had increased to $5.5 million. Using the LCNRV rule, what is the correct journal entry to record this change in value? Select answer from the options below Debit: Cost of Goods Sold, $1 million; Credit: Gain on Inventory Valuation, $1 million Debit: Inventory, $500,000; Credit: Cost of Goods Sold, $500,000 Debit: Gain on Inventory Valuation, $500,000; Credit: Cost of Goods Sold, $500,000 Debit: Inventory, $1 million; Credit: Gain on Inventory Valuation, $1 millionCast Iron Grills, Incorporated, manufactures premium gas barbecue grills. The company reports inventory and cost of goods sold based on calculations from a LIFO periodic inventory system. Cast Iron's December 31, 2024, fiscal year-end inventory consisted of the following (listed in chronological order of acquisition): Units 8,600 5,800 9,600 Unit Cost $ 900 1,000 1,100 The replacement cost of the grills throughout 2025 was $1,200. Cast Iron sold 45,000 grills during 2025. The company's selling price is set at 200% of the current replacement cost. Required: 1. & 2. Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2025 under two different assumptions. First, that Cast Iron purchased 46,000 units and, second, that Cast Iron purchased 24,000 units during the year. 4. Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2025 assuming that Cast Iron purchased 46,000 units (as per the first assumption) and 24,000…Garrison Company uses the retail method of inventory costing. It started the year with an Inventory that had a retall cost of $47,100.00. During the year, Garrison purchased an inventory with a retail sales value of $780,895.00. After performing a physical inventory, Garrison found the inventory at retall to be $51,333.00. The markup is 100% of cost. Determine the ending inventory at Its estimated cost, Oa. $51,333.00 Ob. $25,666.50 Oc. $388.331.00 O d. $21,433.50
- Gatekeeper Company has two products with cost and selling prices as follows: Product X Product Y Selling price Estimated selling cost 2,000,000 600,000 3,000,000 700,000 Materials and conversion 1,500,000 1,800,000 cost General administration cost 300,000 800,000 At year-end, the manufacture of inventory has been completed but no selling cost has been incurred. Question 1: Under the LCNRV by individual item, the inventory shall be measured at what amount? Question 2: Under the LCNRV by total, the inventory shall be measured at what amount?Sandvik Mining uses a periodic inventory system. One of the company’s products is a special equipment for the oil drilling rig. The inventory quantities, purchases and sales of this equipment for the most recent year are as follows: Assuming that current market price of the one unit is $145 and materiality level is set at $350, make necessary journal entry to adjust the balance of ending inventory under each cost assumption – FIFO, LIFO, Average cost.Tristan, Inc., uses the LIFO cost-flow assumption to value inventory. It began the current year with 1,950 units of inventory carried at LIFO cost of $69 per unit. During the first quarter, it purchased 5,550 units at an average cost of $99 per unit and sold 6,400 units at $195 per unit. 1. Assume the company does not expect to replace the units of beginning inventory sold; it plans to reduce inventory by year-end to 500 units. What amount of cost of goods sold should be recorded for the quarter ended March 31?$608,100.$633,600.$646,400.$635,300. 2. Assume the company expects to replace the units of beginning inventory sold in April at a cost of $101 per unit and expects inventory at year-end to be between 1,500 and 2,000 units. What amount of cost of goods sold should be recorded for the quarter ended March 31?$608,100.$633,600.$646,400.$635,300.