Caracas Company Operation Management Assingment Help With Solution
Caracas Company implemented Dollar Value LIFO inventory valuation in 2008, when their ending inventory was $801,150. The following are the inventory amounts for years 2008 – 2014:
Inventory at End of Year
Year Prices Price Index
2009 $835,000 103
2010 $883,900 105
2011 $891,000 108
2012 $925,500 111
2013 $945,800 115
2014 $975,800 116
Calculate the ending inventory for years 2008 – 2014 using Dollar Value LIFO.
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Johnson Corporation reported the following inventory information for the year 2013. Johnson prices its goods to achieve a profit of 25% of sales.
Replacement Selling Disposal
Item Cost Cost Price Costs
A $106 $117 $140 $20
B 83 94 100 10
C 43 46 62 5
D 35 33 48 3
E 75 76 80 7
1. Determine the lower of cost or market for each item. You MUST show all of your steps and calculations in order to receive credit for this problem.
2. The Lower of Cost or Market is a deviation of which principle, constraint or assumption?
Problem 3 – Inventoriablecosts and gross profit method
Wakefield Company is a distributor of outdoor furniture. Wakefield had inventory in the amount of $722,400 on March 1, 2013. The company made the following purchases on account throughout March. All of the freight charges listedare for the purchase of inventory.
1-Mar Purchased $83,500 of inventory from Gomez Corp, terms 1/10, n/30
3-Mar Received freight invoice from Rightway shipping in the amount of $3,700.
5-Mar Purchased $57,800 of inventory from Parson Corp terms, 2/15, n/30
6-Mar Returned $5,600 of damaged inventory to Gomez Corp.
7-Mar Paid freight invoice from Rightway shipping
8-Mar Received freight invoice from Long Haul Shipping in the amount of $3,100.
10-Mar Purchased $106,700 of inventory from Victoria Corp, terms 1/10, n/60
11-Mar Paid freight invoice from Long Haul Shipping
12-Mar Received freight invoice of $4,600 from Nico Shipping.
13-Mar Returned $22,600 of inventory from Victoria Corp
14-Mar Paid invoices to Gomez Corp and Parson Corp
14-Mar Paid invoice to Victoria Corp
19-Mar Paid freight invoice from Nico Shipping
Additionally, Wakefield had to pay $195 in customs duties on the merchandise, $625 to store it at the shipyard until it could be picked up, $550 interest on a loan it used to purchase some of the merchandise, $4,300 to have the some of the furniture assembled, $1,350 to have it engraved with a custom design and $1,530 to ship the furniture to its clients. The company had sales of $865,000 and its markup is 25% of cost. Wakefield uses the periodic method to record its purchases.
1. Prepare the journal entries for the freight costs and purchases of inventory only, assuming that Wakefield records its purchases using the net method. Do not make end of period entries.
2. Prepare the journal entries for the freight costs and purchases of inventory only, assuming that Wakefield records its purchases using the gross method. Do not make end of period entries.
3. What are the total inventoriable costs? How do we account for those items listed above that are not included in inventory?
4. Determine the ending inventory balance using the gross profit method.
5. When is it appropriate to use the gross profit method? (In other words, is it used for official reporting or interim reporting?)
The following is a bonus problem. It is worth 10 points towards this assignment only.
Alton Company’s inventory balance, based on a physical count of the inventory, was $189,500 on December 31, 2013. The following items were not included in this amount. (Note: In some cases, the amount has to be added to the inventory count and in some cases, it has to be deducted from the given amount).
1. Goods costing $37,000 wereshipped to Alton f.o.b. destination on December 20, 2013, were received on January 4, 2014. The invoice cost was $45,000.
2. Goods costing $18,700 wereshipped to Alton f.o.b. shipping point on December 28, 2013, were received on January 5, 2014. The invoice cost was $22,500.
3. Goods costing $42,000 were shipped from Alton to Darville Corp f.o.b. destination on December 27, 2013 and were received by Darville on December 31st, 2013. The sales price was $55,000.
4. On December 24, 2013Lupo Inc. sold goods with a cost of $38,000 to Alton Corp for $50,000, f.o.b. shipping point. Rapid Parcel picked up the goods on December 30, 2013. Lupo billed Alton on December 31, 2013 and Alton received the goods on January 2, 2014.,
5. Goods costing $20,000 were shipped from Alton to Cuoco Corp f.o.b. destination on December 26, 2013. The carrier picked up the goods on December 28th, 2013. Alton billed Cuoco for $24,000 on December 31standthe goods were received by Cuoco on January 2nd, 2014.
6. Alton had goods with a cost of $25,000 and a selling price of $32,000 on consignment at Laci’s Consignment. These goods were not included in the physical count of inventory.
7. Goods costing $30,000 with a selling price of $42,000 were shipped to Fritz Corp f.o.b. shipping point on December 31, 2013. Fritz received the goods on January 5, 2014.
8. Alton sold $65,000 of goods to Corp f.o.b. shipping point on December 27, 2013. Alton billed Gatsby Corp for the goods on December 31, 2013. The goods shipped on January 3 and were received by Gatsby Corp on January 8th.
9. On December 20, 2013, Alton received a bill in the amount of $4,500 for shipping charges from its suppliers. It also had to pay $800 for insurance on the goods, $700 to unload the goods, $3,800 for assembling and painting of some of the items, $6,200 in finance charges and $550 in customs duties for goods shipped from overseas. Alton paid these bills on December 30, 2013.
10. On December 28, 2013 paid $970 to Expedited Parcel for goods shipped to Alton’scustomers.
For each item, determine what amount, (if any) should be added to or deducted from the inventory account. Please number each item and state the amount next to its respective number). If an item does not need to be adjusted to the inventory account, explain why not. (For example, some items may already be included in the inventory account and some items may not be inventoriable costs).
Product Code :Opt23
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