HOMEWORK ASSIGNMENT #5 Financial Accounting, Fall 2017 Due Date: Sunday November 19 at 6 PM (late homework not accepted) Submission Instructions: Via Canvas. Chapter Covered: 9 Instructions: Please type or legibly write your homework solutions. Each student should complete and submit a unique, individually generated homework solutions. You may discuss and work together with your classmates when generating your individual solutions. However, in fairness to all students, you may not seek assistance on specific homework problems from the Professor or TAs (other than in TA session). Homework solutions are due at 6:00 pm on the due date. Late homework will not be accepted, as I will post the solutions to the homework online on the due date. Please submit your homework through canvas. Note: There are additional practice problems posted on Canvas in the Homework folder. You might find it helpful to work through the practice problems along with their solutions before working through the homework assignment below. 1) (LCNRV) Sunshine Company follows the practice of pricing its inventory at the lower-of-cost-or-market, on an individual-item basis. Cost of Estimating Completion Replacement Selling and Normal Item Cost per Cost per Price per Disposal Profit per No. Quantity unit unit unit per unit unit A 1,200 $8.10 $8.00 $9.00 $0.35 $0.90 B 600 6.00 5.60 6.00 0.45 0.50 C 200 5.50 5.00 7.00 0.40 1.00 D 700 7.25 7.50 8.00 0.50 0.90 E 1,000 2.10 2.00 2.80 0.65 0.20 F 500 4.05 4.00 5.00 0.40 0.75 G 2,000 8.75 8.15 9.00 0.60 0.50 H 300 9.95 9.00 10.50 0.30 1.00 Instructions: From the information above, determine the amount of Sunshine Company inventory to be reported on the balance sheet. 2) (Relative Sales Value Method) During 2017, Galarraga Furniture Company purchases a carload of wicker chairs. The manufacturer sells the chairs to Galarraga for a lump sum of $5,985, because it is discontinuing manufacturing operations and wishes to dispose of its entire stock. Three types of chairs are included in the carload. The three types and the estimated selling price for each are listed below. Type Lounge chairs Armchairs Straight chairs No. of Chairs 80 60 140 Estimated Selling Price Each $45 40 25 During 2017, Galarraga sells 40 lounge chairs, 20 armchairs, and 24 straight chairs. Instructions: What is the amount of gross profit realized during 2017? What is the amount of inventory of unsold straight chairs on December 31, 2017? 3) (Purchase Commitments) At December 31, 2017, Stargell Company has outstanding noncancelable purchase commitments for 100,000 gallons, at $1.50 per gallon, of raw material to be used in its manufacturing process. The company prices its raw material inventory at cost or market, whichever is lower. Instructions: a) Assuming that the market price as of December 31, 2017, is $1.65, how would this matter be treated in the accounts and statements? Explain. b) Assuming that the market price as of December 31, 2017, is $1.35, how would you treat this situation in the accounts and statements? c) Give the entry in January 2018, when the 100,000-gallon shipment is received, assuming that the situation given in (b) above existed at December 31, 2017, and that the market price in January 2018 was $1.35 per gallon. Give an explanation of your treatment. 4) (Gross Profit Method) You are called by the CFO of Dolphin Co. on March 9 and asked to prepare a claim for insurance as a result of a theft that took place the night before. You suggest that an inventory be taken immediately. The following data are available. Inventory, March 1 Purchasesgoods placed in stock March 1-9 Salesgoods delivered to customers (gross) Sales returnsgoods returned to stock $ 78,000 112,000 91,000 3,000 Your client reports that the goods on hand on March 9 cost $24,000, but you determine that this figure includes goods of $7,000 received on a consignment basis. Your past records show that sales are made at approximately 20% over cost. Dolphin's insurance covers only goods owned. Instructions: Compute the claim against the insurance company.