Problem 9-11

Sheridan Specialty Company, a division of Lost World Inc., manufactures three models of gear shift components for bicycles that are sold to bicycle manufacturers, retailers, and catalog outlets. Since beginning operations in 1993, Sheridan has used normal absorption costing and has assumed a first-in, first-out cost flow in its perpetual inventory system. The balances of the inventory accounts at the end of Sheridans fiscal year, November 30, 2017, are shown below. The inventories are stated at cost before any year-end adjustments.

Finished goods $621,950

Work in process 105,600

Raw materials 261,600

Factory supplies 74,300

The following information relates to Sheridans inventory and operations.

1. The finished goods inventory consists of the items analyzed below.

Cost

NRV

Down tube shifter

Standard model $72,800 $72,400

Click adjustment model 90,750 88,000

Deluxe model 100,900 103,100

Total down tube shifters 264,450 263,500

Bar end shifter

Standard model 79,600 95,500

Click adjustment model 89,400 87,800

Total bar end shifters 169,000 183,300

Head tube shifter

Standard model 76,800 76,500

Click adjustment model 111,700 114,100

Total head tube shifters 188,500 190,600

Total finished goods $621,950 $637,400

2. One-half of the head tube shifter finished goods inventory is held by catalog outlets on consignment.

3. Three-quarters of the bar end shifter finished goods inventory has been pledged as collateral for a bank loan.

4. One-half of the raw materials balance represents derailleurs acquired at a contracted price 20% above the current market price. The NRV of the rest of the raw materials is $121,100.

5. The total NRV of the work in process inventory is $102,700.

6. Included in the cost of factory supplies are obsolete items with an historical cost of $3,900. The market value of the remaining factory supplies is $71,300.

7. Sheridan applies the LCNRV method to each of the three types of shifters in finished goods inventory. For each of the other three inventory accounts, Sheridan applies the LCNRV method to the total of each inventory account.

8. Consider all amounts presented above to be material in relation to Sheridans financial statements taken as a whole.

(a) Prepare the inventory section of Sheridans balance sheet as of November 30, 2018. (Round answers to 0 decimal places, e.g. 2,556.)

Sheridan Specialty Company

Balance Sheet

November 30, 2018

$

$