Title | Sm06 - Text Book answers |
---|---|
Course | Financial Accounting Concepts |
Institution | Mount Royal University |
Pages | 72 |
File Size | 807.3 KB |
File Type | |
Total Downloads | 40 |
Total Views | 172 |
Text Book answers...
Ki mme l ,We y g a nd t ,Ki e s o ,Tr e nh o l m,I r v i n e ,Bu r nl e y
Fi n a n c i a lAc c o u n t i n g ,Se v e n t hCa n a d i a nEd i t i o n
CHAPTER6 REPORTI NG ANDANALYZI NG I NVENTORY LEARNI NG OBJECTI VES 1. Des c r i bet hes t epsi ndet er mi ni ngi nv ent or yquant i t i es . 2. Appl yt hec os tf or mul asus i ngs pec i fi ci dent i fi cat i on,FI FO,andav er agec os tunder aper pet uali nv ent or ys y s t em. 3. Ex pl ai nt heeffec t sont hefi nanc i als t at ement sofc hoos i ngeac hoft hei nv ent or y c os tf or mul as . 4. I dent i f yt heeffec t sofi nv ent or yer r or sont hefi nanc i al s t at ement s . 5. Demons t r at et hepr es ent at i onandanal y s i sofi nv ent or y . 6. * Appl yt he FI FO and a v er age c os ti nv ent or y cos tf or mul as undera per i odi c i nv ent or ys y s t em ( Appendi x6A) .
So l u t i o n sMa n u a l 6 1 Ch a pt e r6 Co p y r i g h t©20 1 7J oh nWi l e y&So n sCa na da ,Lt d .Un a u t h or i z e dc op y i n g ,d i s t r i b ut i o n,o rt r a n s mi s s i o no ft h i sp a g ei ss t r i c t l ypr oh i b i t e d .
Ki mme l ,We y g a n d t ,Ki e s o ,Tr e n h o l m,I r vi n e ,Bu r nl e y
Fi n a n c i a lAc c o u n t i n g ,Se v e n t hCa n a d i a nEdi t i o n
SUMMARYOFQUESTI ONSBYLEARNI NG OBJECTI VES ANDBLOOM’ STAXONOMY I t e LO m
BT I t em LO
BT I t em LO
BT I t em LO
BT I t em LO
BT
Quest i ons 1.
1
C
2
C
6. 2.
1
C
2
1
1
K
C
2
C
4
9.
4
3
2, 6
C
2, 6
C
21.
C
5
K 22.
C
13.
5
C
2, 6
C
6
C
18.
C
10.
C
17.
C 2
4
C
14.
3 5.
5
12.
8. 4.
C 16.
K
7. 3.
2 11.
19.
C
5
C
15.
20.
Br i efExer ci ses 1.
1
K
4.
2.
1
AP
3.
2
AP
6.
1.
1
C
5.
2.
1
AN
2
5.
2 2
AN AN
7.
3
C
10.
5
AP
13.
8.
4
C
11.
5
AP
14.
9.
AP
AN
4
12.
AN
5
15.
2,6
6
AP
2, 6 AN AP
Exer ci ses
3. 2, 3 4.
2, 3
AN AN
6. 7. 8.
2 2, 3 2, 3 4
AN AN AN AN
9.
4
10. 11.
5 5
AP AN
3, 6
13.
AN
3, 5
12.
AN
6
14.
2, 6
15. 16.
2, 6
AP AN AP AP
Pr obl ems:SetAandB 1.
1
AP
5.
2, 3
AN
9.
5
AN
13.
6
2.
2
AP
6.
2, 5
AP
10.
5
AP
14.
5, 6
3. 2, 3 4.
2, 4
AP AN
7. 8.
4, 5 4, 5
AN AN
11. 12.
5
AP
5
AN
2, 6
15. 16.
2, 6
AP AP AN AN
Account i ngCycl eRevi ew 1.
2
AN
Cases 1.
3
AN
3.
2.
5
AN
4.
So l u t i o n sMa n u a l
1, 2, 3, 6 E 4, 5
E
5.
2, 3
AN
6.
1, 2
E
6 2
7.
2, 3
AN
Ch a pt e r6
Co p y r i g h t©20 1 7J oh nWi l e y&So n sCa na da ,Lt d .Un a u t h or i z e dc op y i n g ,d i s t r i b ut i o n,o rt r a n s mi s s i o no ft h i sp a g ei ss t r i c t l ypr oh i b i t e d .
Ki mme l ,We y g a n d t ,Ki e s o ,Tr e n h o l m,I r vi n e ,Bu r nl e y
Fi n a n c i a lAc c o u n t i n g ,Se v e n t hCa n a d i a nEdi t i o n
Legend:Thef ol l owi ngabbr evi at i onswi l l appeart hr oughoutt hes ol ut i onsmanual fi l e. LO
Lear ni ngobj ect i v e
BT
Bl oom' sTax onomy K Knowl edge C Compr ehensi on AP Appl i c at i on AN Anal y s i s S Synt hesi s E Ev al uat i on Di ffic ul t y : Lev elofdi fficul t y S Si mpl e M Moder at e C Compl ex Ti me: Es t i mat edt i met opr epar ei nmi nut es AACSB
CPACM cpae001 cpae002 cpae003 cpae004 cpae005 cpat 001 cpat 002 cpat 003 cpat 004 cpat 005 c pat 006
Ass oci at i ont oAdv anceCol l egi at eSchool sofBus i nes s Communi cat i on Communi cat i on Et hi cs Et hi c s Anal yt i c Anal y t i c Technol ogy Tech. Di v er si t y Di v er si t y Reflect i v eThi nki ng Reflec.Thi nki ng CPACanadaCompet ency Et hi c s Pr of es si onalandEt hi calBehavi our PSandDM Pr obl emSol v i ngandDec i si onMaki ng Comm. Communi cat i on Sel f Mgt . Sel f Management Team &Lead Teamwor kandLeader s hi p Repor t i ng Fi nanc i al Repor t i ng St at .&Gov . St r at egyandGov er nance Mgt .Account i ng ManagementAccount i ng Audi t Audi tandAss ur anc e Fi nance Fi nance T ax Tax at i on
So l u t i o n sMa n u a l 6 3 Ch a pt e r6 Co p y r i g h t©20 1 7J oh nWi l e y&So n sCa na da ,Lt d .Un a u t h or i z e dc op y i n g ,d i s t r i b ut i o n,o rt r a n s mi s s i o no ft h i sp a g ei ss t r i c t l ypr oh i b i t e d .
Ki mme l ,We y g a n d t ,Ki e s o ,Tr e n h o l m,I r vi n e ,Bu r nl e y
Fi n a n c i a lAc c o u n t i n g ,Se v e n t hCa n a d i a nEdi t i o n
ANSWERSTO QUESTI ONS 1.
Taki ng a phy si cali nv ent or yi nv ol v es act ual l y count i ng,wei ghi ng or meas ur i ngeac hki ndofi nv ent or yonhand.Ret ai l er s ,suchashar dwar e s t or es ,gener al l y hav et housands ofdi ffer enti t ems t o count .Thi si s nor mal l ydone when t he s t or ei sc l osed t o mi ni mi z e er r or sduet ot he mov ementofmer c handi s e.Tom wi l lpr obabl ycounti t emsandmar kt he quant i t y ,des cr i pt i on,and i nv ent or ynumberonpr enumber edi nv ent or y t ags( unl esst hecompanyhasmor eadv ancedt ec hnol ogyt hatcanr ead barcodesoni nv ent or ypr oduct s–wewi l lass umet hatt heydonot ) .He s houl donl yi nc l udei t emsi nt hei nv ent or yt hatar ei nsal eabl econdi t i on. I deal l y ,st r ong i nt er nalcont r ols houl d be ex er t ed ov ert he phy si cal i nv ent or ycount .Forex ampl e,Tom s houl dnothav er esponsi bi l i t yf ort he c ust ody orr ecor dk eepi ng f ort he i nv ent or y .He s houl d al s oc ounti n t eamsoft wo,ort her eshoul dbeas econdcount erchecki ngt heacc ur ac y oft hecount . Adj us t ment smayal sohav et obemadet ot hephy s i cal i nv ent or yc ountf or anygoodsi nt r ansi t .Forex ampl e,i nv ent or ypur c has ed FOB shi ppi ng poi ntt hati sst i l li nt r ans i twi l lhav et obei ncl udedi ni nv ent or y .I nv ent or y t hathasbeenshi ppedbyKi k uj i r ot oc us t omer sFOB des t i nat i onandnot r ec ei v edbyt hecust omerbef or ey ear endwi l lal s ohav et obei nc l udedi n t hecount .Fi nal l y ,anyofKi k uj i r o’ si nv ent or yhel d byot herr et ai l er son cons i gnmentwi l lhav et obei ncl udedi nt hecountaswel l .
L O 1 BT:C Di fficul t y :M Ti me:20mi n.AACSB:None CPA:c pat 001 CM:Repor t i ng
2.
I nacons i gnmentagr eement ,t hecons i gnori st hebusi nes st hatownst he goods ,andt hecons i gneei st hebusi nesst hatwi l lsel lt hegoods,wi t hout havi ng t o pur c has e and own t he goods bef or et hey ar e sol d.The cons i gneewi l ls el lt hegoodsf ort hecons i gnorf oraf eeoraper cent age oft hes al espr i ce.Onl yt heownerofgoods ,t hecons i gnor ,i nc l udest he goodsi ni t si nv ent or yev ent hought hegoodsar ephy si cal l yl ocat edont he cons i gnee’ spr emi ses .
L O 1 BT:C Di fficul t y :M Ti me:5mi n.AACSB:None CPA:cpat 001 CM:Repor t i ng
3.
( a) Thegoodswi l lbei ncl udedi nJ ani neLt d. ’ s( t hes el l er ’ s)i nv ent or yi f t het er msofsal ear eFOBdest i nat i on. ( b) The goodswi l lbe i ncl uded i n Fast r akCor por at i on’ s( t he buy er ’ s ) i nv ent or yi ft het er msofsal ear eFOBshi ppi ngpoi nt .
L O 1 BT:K Di ffic ul t y :S Ti me:5mi n.AACSB:None CPA:c pat 001 CM:Repor t i ng
So l u t i o n sMa n u a l
6 4
Ch a pt e r6
Co p y r i g h t©20 1 7J oh nWi l e y&So n sCa na da ,Lt d .Un a u t h or i z e dc op y i n g ,d i s t r i b ut i o n,o rt r a n s mi s s i o no ft h i sp a g ei ss t r i c t l ypr oh i b i t e d .
Ki mme l ,We y g a n d t ,Ki e s o ,Tr e n h o l m,I r vi n e ,Bu r nl e y
4.
Fi n a n c i a lAc c o u n t i n g ,Se v e n t hCa n a d i a nEdi t i o n
( a) I ncl ude:t hei nv ent or yi t emsbel ongt oKi ngswayasKi ngs wayi st he cons i gnor . ( b) I nc l ude:t he i nv ent or yi t ems bel ong t o Ki ngs way whi l ei nt r ans i t becaus et het er msar eFOBshi ppi ngpoi nt . ( c ) Ex c l ude:t hec ust omerhaspur c hasedt hei nv ent or yi t em andl egal owner shi phaspas sedt ot hecust omer .
L O 1 BT:C Di fficul t y :M Ti me:5mi n.AACSB:None CPA:cpat 001 CM:Repor t i ng
5.
( a) Theuni tcostofani nv ent or yi t em i sneededf ort heent r yt or ecor d t hecos tofgoodssol dandr emov et hecostoft hei t emss ol df r om i nv ent or y .Because uni t soft he s ame i nv ent or yi t em ar et ypi cal l y pur c hasedatdi ffer entpr i ces,i ti snecess ar yt odet er mi newhi chuni t cost st ous ei nt hecal cul at i onoft hecostoft hegoodssol d. ( b) When us i ng t he per pet uals y st em,anent r yt or ecor dt he costof goodss ol dandr emov et hec os toft hei t emss ol df r om i nv ent or yi s r ecor dedatt hesamet i meast hesal est r ans ac t i on.Thei nf or mat i on f r om t he per pet uals y s t em i s updat ed,us i ng t he costf or mul a adopt ed by t he bus i ness .The cos tf or mul ai s al s o used i nt he det ai l edper pet ualr ecor dsf orev er yi ncr eas ei ni nv ent or ycausedby pur c hases ,f r ei ght i n,et c .t r ans act i ons.Ont heot herhand,si ncea r ecor di snotk eptoft hei ndi v i duali nv ent or yi t em t r ansact i onsunder t heper i odi cs y st em,t heent r yt or ec or dt hecos tofgoodss ol dand r emov et hec ostoft hei t emss ol df r om i nv ent or yc anonl ybemade at t he end of a r epor t i ng per i od, when endi ng i nv ent or yi s det er mi nedbyaphy si calcount .
L O 2 BT:C Di fficul t y :M Ti me:10mi n.AACSB:None CPA:c pat 001 CM:Repor t i ng
So l u t i o n sMa n u a l 6 5 Ch a pt e r6 Co p y r i g h t©20 1 7J oh nWi l e y&Son sCa na da ,Lt d .Un a u t h or i z e dc op y i n g , di s t r i b ut i o n,o rt r a n s mi s s i o no ft h i sp a g ei ss t r i c t l ypr o hi b i t e d .
Ki mme l ,We y g a n d t ,Ki e s o ,Tr e n h o l m,I r vi n e ,Bu r nl e y
6.
Fi n a n c i a lAc c o u n t i n g ,Se v e n t hCa n a d i a nEdi t i o n
( a) The s peci fic i dent i ficat i on f or mul at r acks t he phy si c alflow of i ndi v i duali nv ent or yi t ems ,mat chi ngt hecos toft heact uali t em s ol d agai nstt her ev enuef r om t hati t em.TheFI FO i nv ent or ycostf or mul a ass umest hefir s ti nv ent or ypur c hasedi st hefi r sti nv ent or ysol d.The mostr ecentpur c has esar eass umedt or emai ni nendi ngi nv ent or y . Theav er agecostf or mul aass umest hatal lgoodsav ai l abl ef orsal e ar ei ndi s t i ngui s habl eorhomogeneous . ( b) Anex ampl eofi nv ent or ywher et hespec i fici dent i fic at i onwoul dbe appr opr i at e woul d be f or goods t hat ar e not or di nar i l y i nt er c hangeabl e, such as aut omobi l es wi t h uni que v ehi c l e i dent i fic at i onnumber s. I nv ent or ysuchasgr ocer i escoul dbeacc ount edf orusi ngt heFI FO costf or mul aasol deri t emsar enor mal l ysol dfir s t . I nv ent or ys uch as har dwar e coul d be account ed f orusi ng an av er agec ostf or mul a.
L O 2 BT:C Di fficul t y :M Ti me:10mi n.AACSB:None CPA:c pat 001 CM:Repor t i ng
7.
( a) Av er agecostorFI FO canbeusedi ft hegoodsav ai l abl ef orsal ear e i dent i cal .Speci fici dent i fic at i onc annotbeusedi ft hegoodsar enot s pec i fic al l yi dent i fi abl e. ( b)FI FO ass umest hatt hefir s tgoodspur c hasedar et hefir s tt obes ol d. ( c )Spec i fic i dent i fi cat i on mat ches t he act ual phy si cal fl ow of mer c handi s e.
L O 2 BT:K Di ffic ul t y :S Ti me:5mi n.AACSB:None CPA:c pat 001 CM:Repor t i ng
8.
Anewwei ght edav er ageuni tcos tmus tbec al cul at edaf t ereachpur c has e becaus eanewcostamounti saddedt ot he“ c ostpool ” .Thi schangest he t ot aldol l ar si nt hecostpoolandt hequant i t yofuni t sonhandi nt hecost pool .A sal ewi t hdr awsuni t sandt ot aldol l ar sf r om t hecostpoolatt he wei ght edav er agecost .Thi sdoesnotaffectt hewei ght edav er agecos tof t her emai ni nguni t s .Thati s ,t hewei ght edav er agecos toft her emai ni ng uni t si sunc hangedaf t erasal e.
L O 2 BT:C Di fficul t y :M Ti me:5mi n.AACSB:None CPA:cpat 001 CM:Repor t i ng
So l u t i o n sMa n u a l
6 6
Ch a pt e r6
Co p y r i g h t©20 1 7J oh nWi l e y&Son sCa na da ,Lt d .Un a u t h or i z e dc op y i n g , di s t r i b ut i o n,o rt r a n s mi s s i o no ft h i sp a g ei ss t r i c t l ypr o hi b i t e d .
Ki mme l ,We y g a n d t ,Ki e s o ,Tr e n h o l m,I r vi n e ,Bu r nl e y
9.
Fi n a n c i a lAc c o u n t i n g ,Se v e n t hCa n a d i a nEdi t i o n
Acompanys houl dconsi der :
Whet hert he goodsar ei nt er c hangeabl e ornot ,orwhet hert hey ar epr oducedors egr egat edf ors peci fi cpr oj ect s;
Whet hert hef or mul acor r es pondsmostc l osel yt ot hephy s i calfl ow ofgoods;
Whet hert hef or mul ar epor t si nv ent or yont hes t at ementoffinanci al pos i t i ont hati scl oset ot hei nv ent or y’ smos tr ecentcos t ;and
Whet hert he f or mul ai s used f orot heri nv ent or i es wi t h a si mi l ar nat ur eandusage.
L O 3 BT:C Di fficul t y :M Ti me:5mi n.AACSB:None CPA:cpat 001 CM:Repor t i ng
10. Av er agecostpr oducest hebet t eri ncomes t at ementv al uat i onbec aus e t hec ostofgoodss ol di sdet er mi nedus i ngmor er ecenti nv ent or ypr i ces. Thi sbet t ermat chescur r entcost swi t hc ur r entr ev enues. FI FO pr oducest hebet t erv al uat i onont hes t at ementoffi nanci alposi t i on becaus et heendi ngi nv ent or yi sdet er mi nedus i ngt hemos tr ecentpr i ces . Si ncet henor mali nt enti st or epl ac et hei nv ent or yaf t eri ti ssol d,t hemost r ec entpr i cesar emor er el ev antf ordeci s i onmak i ng. L O 3 BT:C Di fficul t y :M Ti me:5mi n.AACSB:None CPA:cpat 001 CM:Repor t i ng
So l u t i o n sMa n u a l
6 7
Ch a pt e r6
Co p y r i g h t©20 1 7J oh nWi l e y&Son sCa na da ,Lt d .Un a u t h or i z e dc op y i n g , di s t r i b ut i o n,o rt r a n s mi s s i o no ft h i sp a g ei ss t r i c t l ypr o hi b i t e d .
Ki mme l ,We y g a n d t ,Ki e s o ,Tr e n h o l m,I r vi n e ,Bu r nl e y
Fi n a n c i a lAc c o u n t i n g ,Se v e n t hCa n a d i a nEdi t i o n
11. ( a) No effect– cash i snotaffect ed byt he c hoi ce ofi nv ent or ycost f or mul as . ( b) I n aper i od ofdec l i ni ng pr i ces,FI FO wi l lpr oducea l owerendi ng i nv ent or yasi nv ent or yi sdet er mi nedusi ngt hemos tr ecent( l ower ) pr i ces .Av er age costwi l lpr oduce a hi gherendi ng i nv ent or y as endi ngi nv ent or yi ncor por at est hehi gherol derpr i ces . ( c ) Thecostofgoodss ol deffecti sopposi t et ot hatofendi ngi nv ent or y . Hence,costofgoods s ol d wi l lbe hi gherunderFI FO and l ower undert heav er agecostf or mul a. ( d) Becaus eoft heeffectont hecostofgoodssol dasout l i nedi n( c ) ,net i ncomewi l lbel owerunderFI FO andhi gherunderav er agecost . ( e) Thei mpactonr et ai nedear ni ngswi l lbet hes ameast hei mpacton neti ncome and endi ng i nv ent or y—l oweri n a per i od ofdec l i ni ng pr i cesus i ngFI FO andhi gherus i ngav er agecost . L O 2 BT:C Di fficul t y :C Ti me:10mi n.AACSB:None CPA:c pat 001 CM:Repor t i ng
12. Theer r orshoul dbecor r ect edi fi twi l lc hanget hefigur espr esent edont he fi nanci alst at ement s.Whi l er et ai ned ear ni ngs may notchange,ot her fi nanci alst at ementi t ems and compar at i v e figur es may c hange.Thi s i nf or mat i onmayi mpactauser ’ sdec i s i on. L O 4 BT:C Di fficul t y :C Ti me:5mi n.AACSB:None CPA:cpat 001 CM:Repor t i ng
So l u t i o n sMa n u a l
6 8
Ch a pt e r6
Co p y r i g h t©20 1 7J oh nWi l e y&Son sCa na da ,Lt d .Un a u t h or i z e dc op y i n g , di s t r i b ut i o n,o rt r a n s mi s s i o no ft h i sp a g ei ss t r i c t l ypr o hi b i t e d .
Ki mme l ,We y g a n d t ,Ki e s o ,Tr e n h o l m,I r vi n e ,Bu r nl e y
Fi n a n c i a lAc c o u n t i n g ,Se v e n t hCa n a d i a nEdi t i o n
13. ( a) Mi l aLt d. ’ s2018i ncomebef or et axwi l lbeunder st at edby$43, 000. Thi si sbecaus eanunder st at ementofendi ngi nv ent or ywi l lr es ul ti n an ov er s t at ementofcos tofgoodss ol d.I fcos tofgoodssol di s ov er s t at ed,t heni ncomebef or et axwi l lbeunder st at ed. ( b) 2018r et ai nedear ni ngswi l lbeunder st at edby$43, 000becaus enet i ncomei sunder s t at ed( s ee( 1)abov e) . ( c ) 2018 t ot als har ehol der s ’equi t y wi l lbe under s t at ed by $43, 000 becaus et he r et ai ned ear ni ngs bal ance i s under s t at ed ( s ee ( b) abov e) . ( d) 2019 neti ncome wi l lbe ov er s t at ed $43, 000.Thi si s because begi nni ngi nv ent or yi sunder st at edby$43, 000,whi chwi l lr es ul ti nan under st at ementofcostofgoodss ol d( r ecogni z i ngt hat2018endi ng i nv ent or yi s 2019 begi nni ng i nv ent or y) .I fcostofgoods s ol di s under st at ed,t heni ncomebef or et axwi l lbeov er s t at ed. ( e) 2019r et ai nedear ni ngswi l lbecor r ectbecauset heunder st at ement i nneti nc omei n2018andov er st at ementi n2019wi l lcanc eleac h ot her . ( f ) 2019t ot als har ehol der s ’equi t ywi l lbec or r ectbecauset her et ai ned ear ni ngsbal ancei scor r ec t . L O 4 BT:C Di fficul t y :C Ti me:15mi n.AACSB:Anal y t i c CPA:c pat 001 CM:Repor t i ng
So l u t i o n sMa n u a l
6 9
Ch a pt e r6
Co p y r i g h t©20 1 7J oh nWi l e y&Son sCa na da ,Lt d .Un a u t h or i z e dc op y i n g , di s t r i b ut i o n,o rt r a n s mi s s i o no ft h i sp a g ei ss t r i c t l ypr o hi b i t e d .
Ki mme l ,We y g a n d t ,Ki e s o ,Tr e n h o l m,I r vi n e ,Bu r nl e y
Fi n a n c i a lAc c o u n t i n g ,Se v e n t hCa n a d i a nEdi t i o n