Financial Accounting Chapter 6. P6-5, P6-6, and P6-7.

P6-5A. Inventory Turnover and Days' Sales in Inventory The Southern Corporation installed a new inventory management system at the beginning of 2018. Shown below are data from the company's accounting records as reported by the new system:

2018 2019

sales revenue.......$19,000,000 $20,000,000

Cost of goods sold..............$8,600,000 $9,200,000

Beginning Inventory.............$2,500,000 $2,530,000

Ending Inventory..............................................................................................$2,530,000 $2,600,000

Calculate the company's (a) Inventory Turnover (round to three decimal places) and (b) days' sales in inventory for 2018 and 2019. Comment on your results.

P6-6A. Goods in Transit The Yankee Wholesale Company sells merchandise to a variety of retailers. Yankee uses different freight terms with its various customers and suppliers. All sales are made on account.

Required

For each of the following transactions, indicate which company has ownership of the goods in transit:

a. Yankee sold merchandise to X-Mart stores, with shipping terms of F.O.B shipping point.

b. Yankee purchased merchandise from Zendo Manufacturing Company, with shipping terms of F.O.B. destination.

c. Yankee Sold merchandise to Mary's boutique, with shipping terms of F.O.B destination.

d. Sunshine Manufacturing Company sold merchandise to Yankee, with shipping terms of F.O.B. shipping point.

e. Yankee purchased merchandise from Warfield Manufacturing Company, with freight terms of F. O. B shipping point.

f. Stevenson Stores purchased merchandise from Yankee, with shipping terms of F.O.B shipping point.

P6-7A. Lower-of-Cost-or-Net Realizable Value Method The Vandy Company had the following inventory at year-end:

Unit Price

Quantity Cost Net Realizable Value

Fans

Model X1...................................................................................300 $18 $19

Model X2..................................................................................250 23 24

Model X3..................................................................................450 29 25

Heaters

Model B7...................................................................................500 24 30

Model B8...................................................................................290 35 32

Model B9...................................................................................100 41 37

Required

a. Determines the value of ending inventory after applying the lower-of-cost-or-net realizable value method to each item of inventory.

b. Would the net income be lower under the cost method or the lower-of-cost-or-net realizable value method?