Assignment Requirements
Task 2.2
Inventory valuation
Instructions:
1. After reading the study material for this module works the following exercises from chapter 8 of the E-book Kieso, DE, Weygandt, JJ, & Warfield, TD (2010). Intermediate accounting (13th ed.). Hoboken, NJ: Wiley.
a. P8-4 (p.425) (FIFO, LIFO and average cost, 30 points)
b. P8-11 (p.428) (Dollar Value LIFO, 20 points)
2. You must submit answers to the exercises in full.
3. Save the task in Word or Excel format
Task 2.2
Inventory valuation
Instructions:
1. After reading the study material for this module works the following exercises from chapter 8 of the E-book Kieso, DE, Weygandt, JJ, & Warfield, TD (2010). Intermediate accounting (13th ed.). Hoboken, NJ: Wiley.
a. P8-4 (p.425) (FIFO, LIFO and average cost, 30 points)
b. P8-11 (p.428) (Dollar Value LIFO, 20 points)
2. You must submit answers to the exercises in full.
3. Save the task in Word or Excel format
Exercise:
P8-4 (Compute FIFO, LIFO, and Average Cost) Hull Company’s record of transactions concerning part X for the month of April was as follows.
Purchases Sales
April 1 (balance on hand) 100 @ $5.00 April 5 300
4 400 @ 5.10 12 200
11 300 @ 5.30 27 800
18 200 @ 5.35 28 150
26 600 @ 5.60
30 200 @ 5.80
Instructions
(a)Compute the inventory at April 30 on each of the following bases. Assume that perpetual inventory records are kept in units only. Carry unit costs to the nearest cent.
(1) First-in, first-out (FIFO).
(2) Last-in, first-out (LIFO).
(3)Average cost.
(b) If the perpetual inventory record is kept in dollars, and costs are computed at the time of each withdrawal, what amount would be shown as ending inventory in 1, 2, and 3 above? Carry average unit costs to four decimal places.
P8-11 (Dollar-Value LIFO) Richardson Company cans a variety of vegetable-type soups. Recently, the company decided to value its inventories using dollar-value LIFO pools. The clerk who accounts for inventories does not understand how to value the inventory pools using this new method, so, as a private consultant, you have been asked to teach him how this new method works.
He has provided you with the following information about purchases made over a 6-year period.
Ending Inventory Price
Date (End-of-Year Prices) Index
Dec. 31, 2006 $80,000 100
Dec. 31, 2007 111,300 105
Dec. 31, 2008 108,000 120
Dec. 31, 2009 128,700 130
Dec. 31, 2010 147,000 140
Dec. 31, 2011 174,000 145
You have already explained to him how this inventory method is maintained, but he would feel better about it if you were to leave him detailed instructions explaining how these calculations are done and why he needs to put all inventories at a base-year value.
Instructions
(a)Compute the ending inventory for Richardson Company for 2006 through 2011 using dollar-value LIFO.
(b)Using your computation schedules as your illustration, write a step-by-step set of instructions explaining how the calculations are done. Begin your explanation by briefly explaining the theory behind this inventory method, including the purpose of putting all amounts into base-year price levels.
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