Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Springer Anderson Gymnastics prepared its annual financial statements dated December 31. The company used the FIFO inventory costing method, but it failed to apply the

Springer Anderson Gymnastics prepared its annual financial statements dated December 31. The company used the FIFO inventory costing method, but it failed to apply the LC&NRV to the ending inventory. The preliminary income statement is as follows:

Sales Revenue $ 225,000
Cost of Goods Sold
Beginning Inventory $ 23,500
Purchases 125,000
Goods Available for Sale

148,500

Ending Inventory (FIFO cost) 30,395
Cost of Goods Sold 118,105
Gross Profit 106,895
Operating Expenses 48,000
Income from Operations 58,895
Income Tax Expense (30%) 17,669
Net Income $ 41,227

Assume that you have been asked to restate the financial statements to incorporate the LC&NRV. You have developed the following data relating to the ending inventory:

Purchase Cost Current Replacement Cost per Unit (Net Realizable Value)
Item Quantity Per Unit Total
A 1,670 $ 2.00 $ 3,340 $ 4.35
B 920 5.50 5,060 2.00
C 3,660 3.50 12,810 1.00
D 1,670 5.50 9,185 3.50
$ 30,395

Required: 1-a. Restate the income statement to reflect the LC&NRV rule of the ending inventory.

1-b. Apply the lower of cost and net realizable value on an item-by-item basis and show computations.

2. Not available in connect. 3. Not available in connect.

Next

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Audit In The Mental Health Service

Authors: Firth-Cozens Jenny

1st Edition

0863773117, 978-0863773112

More Books

Students also viewed these Accounting questions

Question

Explain the tax attributes of a sole pro- prietorship.

Answered: 1 week ago