Breif excercise-Inventory

  

Midori Company had ending inventory at end-of-year prices of $138,500 at December 31,

2013

; $165,771 at December 31,

2014

; and $181,366 at December 31,

2015

. The year-end price indexes were

100

at 12/31/13, 113 at 12/31/14, and 118 at 12/31/15.
 

Compute the ending inventory for Midori Company for 2013 through 2015 using the dollar-value LIFO method.

   

 

2013
2014
2015
 

Ending Inventory

$ 138,500 

$ 147,766 

$156,026

     

Brief   Exercise 8-9

  
 

Your     answer is correct. 

Arna, Inc. uses the dollar-value   LIFO method of computing its inventory. Data for the past 3 years follow.

  

Year Ended
December 31

Inventory at
Current-Year Cost

Price
Index

 
2013

$20,000

100
 
2014

22,363

107

 
2015

26,656

112

   Compute the value of the 2014 and 2015 inventories using the dollar-value   LIFO method.

    
2014
2015
 

Inventory     under LIFO

$ 20,963 

$ 24,211 

      

 

Ann M. Martin Company makes the following errors during the current year. (In all cases, assume ending inventory in the following year is correctly stated.)

  
1.

Ending inventory is overstated,   but purchases and related accounts payable are recorded correctly.

 
2.

Both ending inventory and   purchases and related accounts payable are understated. (Assume this purchase   was recorded and paid for in the following year.)

 
3.

Ending inventory is correct, but a   purchase on account was not recorded. (Assume this purchase was recorded and   paid for in the following year.)

 Indicate the effect of each of these errors on working capital, current ratio (assume that the current ratio is greater than 1), retained earnings, and net income for the current year and the subsequent year.

      

Current   Year

Subsequent   Year

 
1.

Working capital

Overstated

No effect

   

Current ratio

Overstated
No effect
   

Retained earnings

Overstated
No effect
   

Net income

Overstated

Understated

 
 
2.
Working capital
No effect
No effect
   
Current ratio
Overstated
No effect
   
Retained earnings
No effect
No effect
   
Net income
No effect
No effect
 
 
3.
Working capital
Overstated
No effect
   
Current ratio
Overstated
No effect
   
Retained earnings
Overstated
No effect
   
Net income
Overstated
Understated

    and other questions