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Wednesday, 4 October 2017

Cortez Company sells chairs that are used at computer stations. Its beginning inventory of chairs was 130 units at $60 per unit.

Cortez Company sells chairs that are used at computer stations. Its beginning inventory of chairs was 130 units at $60 per unit. During the year, Cortez made two batch purchases of this chair. The first was a 146-unit purchase at $68 per unit; the second was a 224-unit purchase at $72 per unit. During the period, it sold 292 chairs.
 
Required
Determine the amount of product costs that would be allocated to cost of goods sold and ending
inventory, assuming that Cortez uses
a. FIFO:

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b. LIFO:
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c. Weighted average:
 
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Explanation:
CORTEZ COMPANY
Inventory Purchases
  Beginning inventory 130   @ $60   = $7,800  
  First purchase 146   @ 68   = 9,928  
  Second purchase 224   @ 72   = 16,128  
 
     
  Goods available for sale 500         $33,856  
 

     




c.        
Total Cost ÷ Total Units = Cost per Unit
$ 33,856 ÷ 500 = $ 68


The following information pertains to Mason Company for 2016:

The following information pertains to Mason Company for 2016:

  
  Beginning inventory 132  units @ $ 38  
  Units purchased 390  units @ $ 57  



Ending inventory consisted of 50 units. Mason sold 472 units at $114 each. All purchases and sales were made with cash. Operating expenses amounted to $3,675.


Required
a. Compute the gross margin for Mason Company using the following cost flow assumptions: (1) FIFO, (2) LIFO, and (3) weighted average.  

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Explanation:


 b. What is the amount of net income using FIFO, LIFO, and weighted average? (Ignore income tax considerations.)
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Explanation:
  FIFO   LIFO   Weighted Avg.
 Sales $ 53,808     $ 53,808     $ 53,808  
  Cost of goods Sold   (24,396 )     (25,346 )     (24,636 )
 










 Gross margin   29,412       28,462       29,172  
 Operating expenses    3,675        3,675        3,675  
 










  Net income $ 25,737     $ 24,787     $ 25,497  
 























c. Compute the amount of ending inventory using (1) FIFO, (2) LIFO, and (3) weighted average. 

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Explanation:
  Ending Inventory          
  FIFO 50 @ $57   $ 2,850    
  LIFO 50 @ $38     1,900    
  Weighted average 50 @ $52.195     2,610*  



*rounded to the nearest whole dollar.


Friday, 15 July 2016

On December 31, 2016, the end of the fiscal year, California Microtech Corporation completed the sale of its semiconductor business for $17 million. The business segment qualifies as a component of the entity according to GAAP. The book value of the assets of the segment was $16 million. The loss from operations of the segment during 2016 was $4.6 million. Pretax income from continuing operations for the year totaled $6.7 million. The income tax rate is 30%. Prepare the lower portion of the 2016 income statement beginning with pretax income from continuing operations. Ignore EPS disclosures.

On December 31, 2016, the end of the fiscal year, California Microtech Corporation completed the sale of its semiconductor business for $17 million. The business segment qualifies as a component of the entity according to GAAP. The book value of the assets of the segment was $16 million. The loss from operations of the segment during 2016 was $4.6 million. Pretax income from continuing operations for the year totaled $6.7 million. The income tax rate is 30%.
 
Prepare the lower portion of the 2016 income statement beginning with pretax income from continuing operations. Ignore EPS disclosures.

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Explanation:
Income tax expense = $6,700,000 × 30% = $2,010,000
Loss from operations of discontinued component:
  
         
  Gain on sale of assets $ 1,000,000   ($17 million less $16 million)
  Loss from operations   (4,600,000 )  
 


 
     Total before-tax loss $ (3,600,000 )