At December 31,2017 McGlaggen Corporation reported current asstes of Question At December 31,2017 McGlaggen Corporation reported current asstes of $638,000 and current liabilities of $384,000. The following items may have been recorded incorrectly. McGlaggen uses the periodic method. 1. Goods purchased costing $10,000 were shipped f.o.b. destination by a supplier on December 26. McGlaggen received and recorded the invoice on December 31, but the goods were not included in McGlaggen’s physical count of inventory because they were not received until January 2. 2. Freight-in of $4,000 was debited to advertising expense on December 28. 3. Goods purchased costing $11,000 were shipped f.o.b. shipping point by a supplier on December 28. McGlaggen received and recorded the invoice on December 29, but the goods were not included in McGlaggen’s physical count of inventory because they were not received until January 4. 4. Goods held on consignment from Brown Company were included in McGlaggen’s physical count of inventory at $13,000. Instructions (a) Compute the current ratio based on McGlaggen’s balance sheet. (b) Recompute the current ratio after corrections are made. (c) By what amount will income (before taxes) be adjusted up or down as a result of the corrections? 2 5 E8-13B (FIFO and LIFO—Periodic and Perpetual) Inventory information for Part 311 of Bonds Corp. discloses the following information for the month of June. June 1 Balance 11 Purchased 20 Purchased 450 units @ $1 1,200 units @ $2 750 units @ $3 June 10 Sold 15 Sold 27 Sold 300 units @ $2.40 750 units @ $2.50 450 units @ $2.70 Instructions (a) Assuming that the periodic inventory method is used, compute the cost of goods sold and ending inventory under (1) LIFO and (2) FIFO. (b) Assuming that the perpetual inventory method is used and costs are computed at the time of each withdrawal, what is the value of the ending inventory at LIFO? (c) Assuming that the perpetual inventory method is used and costs are computed at the time of each withdrawal, what is the gross profit if the inventory is valued at FIFO? (d) Why is it stated that FIFO usually produces a higher gross profit than LIFO? 2 5 E8-17B (FIFO and LIFO—Periodic and Perpetual) The following is a record of Ensberg Company’s trans- actions for Colt Products for the month of May. May 1 Balance 600 units @ 12 $10.00 900 units @ Purchase 28 $03.00 600 units @ Purchase $15.00 May 10 Sale 450 units @ $19 20 Sale 810 units @ $19 Instructions (a) Assuming that perpetual inventories are not maintained and that a physical count at the end of the month shows 840 units on hand, what is the cost of the ending inventory using (1) FIFO and (2) LIFO? (b) Assuming that perpetual records are maintained and they tie into the general ledger, calculate the ending inventory using (1) FIFO and (2) LIFO. 8 E8-24B (Dollar-Value LIFO) The dollar-value LIFO method was adopted by Queen Corp. on January 1, 2014. Its inventory on that date was $510,000. On December 31, 2017, the inventory at prices existing on that date amounted to $530,000. The price level at January 1, 2017, was 100, and the price level at December 31, 2017, was 106. • 1 • 2Chapter 8 Valuation of Inventories: A Cost-Basis Approach Instructions (a) Compute the amount of the inventory at December 31, 2017, under the dollar-value LIFO method. (b) On December 31, 2017, the inventory at prices existing on that date was $588,600, and the price level was 109. Compute the inventory on that date under the dollar-value LIFO method. 2 5 P8-4B (Compute FIFO, LIFO, and Average-Cost) Pillsbury Company’s record of transactions concerning part WA6 for the month of September was as follows. Purchases September 1 (balance on hand) 3 12 16 22 26 Sales 300 @ 200 @ 300 @ 300 @ 500 @ 300 @ $03.00 12.10 12.25 12.30 12.30 12.40 September 4 17 27 30 400 600 300 200 Instructions (a) Compute the inventory at September 30 on each of the following bases. Assume that perpetual in- ventory records are kept in units only. Carry unit costs to the nearest cent. (1) First-in, first-out (FIFO). (2) Last-in, first-out (LIFO). (3) Average cost. 8 P8-8B (Dollar-Value LIFO) Marco Sun Fun manufactures three categories of bicylces: Mountain, Road, and Hybrid. On January 1, 2017, Marco adopted dollar-value LIFO and decided to use a single inventory pool. The company’s January 1 inventory consists of: Category Quantity Cost per Unit Total Cost Mountain Road Hybrid 3,000 2,000 5,000 $450 800 250 $1,350,000 1,600,000 1,250,000 10,000 $4,200,000 During 2017, the company had the following purchases and sales. Category Quantity Purchased Cost per Unit Quantity Sold Selling Price per Unit Mountain Road Hybrid 10,000 9,000 13,000 $495 820 300 11,000 8,000 12,000 $ 650 1,200 500 32,000 31,000 Instructions (Round to four decimals.) (a) Compute ending inventory, cost of goods sold, and gross profit.