ASSIGNMENT 08
A04 Intermediate Accounting I
Directions: Be sure to make an electronic copy of your answer before submitting it to
Ashworth College for grading. Unless otherwise stated, answer in complete sentences,
and be sure to use correct English spelling and grammar. Sources must be cited in APA
format. Refer to the "Assignment Format" page for specific format requirements.
Part A (30 points)
The Bravo Company manufactures a single product. On December 31, 2012 Bravo
adopted the dollar-value LIFO inventory method. The inventory on that date using the
dollar-value LIFO inventory method was determined to be $500,000. Inventory data for
succeeding years are as follows:
Year Ended December 31
2012
2013
2014
2015 Inventory at Respective
Year-end Prices
$500,000
527,000
635,000
645,000 Relevant Price Index
(Base Year 2012)
1.00
1.08
1.15
The Bravo Company manufactures a single product. On December 31, 2012 Bravo
adopted the dollar-value LIFO inventory method. The inventory on that date using the
dollar-value LIFO inventory method was determined to be $500,000. Inventory data for
succeeding years are as follows:
Year Ended December 31
2012
2013
2014
2015 Inventory at Respective
Year-end Prices
$500,000
527,000
635,000
645,000 Relevant Price Index
(Base Year 2012)
1.00
1.08
1.15
1.21 Compute the inventory amount at December 31, 2013, 2014, and 2015 using the dollar value LIFO inventory method for each year. (Round all amounts to the nearest dollar, 10 points each)
Part B (40 points)
Information from Hope Company’s records for the year ended December 31, 2015 is
available as follows:
$2,800,000
Net sales
Cost of goods manufactured:
Variable
$1,260,000
Fixed
$630,000
Operating expenses:
Variable
$196,000
Fixed
$240,000
Units manufactured
70,000
Units sold
60,000
Finished goods inventory, 1/1/2015
$0
Hope had no work-in-process inventories at either the beginning or end of 2015.
a. What would be Hope’s finished goods inventory cost under the variable (direct)
costing method at December 31, 2015? (20 points)
b. What would Hope’s operating income be under the absorption costing method?
(20 points)
Information from Hope Company’s records for the year ended December 31, 2015 is
available as follows:
$2,800,000
Net sales
Cost of goods manufactured:
Variable
$1,260,000
Fixed
$630,000
Operating expenses:
Variable
$196,000
Fixed
$240,000
Units manufactured
70,000
Units sold
60,000
Finished goods inventory, 1/1/2015
$0
Hope had no work-in-process inventories at either the beginning or end of 2015.
a. What would be Hope’s finished goods inventory cost under the variable (direct)
costing method at December 31, 2015? (20 points)
b. What would Hope’s operating income be under the absorption costing method?
(20 points)
Part C (30 points, 10 each)
Tool City, Inc. had 300 cordless screwdrivers on hand at January 1, 2015 costing $45
each. Purchases and sales of cordless screwdrivers during the month of January were as
follows:
Date
Purchases
Sales
January 9
200 @ $75
January 14
100 @ $47
January 23
75 @ $76
January 25
100 @ $48
January 30
75 @ $77
Tool City does not maintain perpetual inventory records. According to a physical count, 150 cordless screwdrivers were on hand at January 31, 2015.
a. What is the cost of the inventory at January 31, 2015 under the FIFO method?
b. What is the cost of the inventory at January 31, 2015 under the LIFO method?
c. What is the cost of the inventory at January 31, 2015 under the FIFO method if only 145 cordless screwdrivers were on hand at the time of the physical count?
Tool City, Inc. had 300 cordless screwdrivers on hand at January 1, 2015 costing $45
each. Purchases and sales of cordless screwdrivers during the month of January were as
follows:
Date
Purchases
Sales
January 9
200 @ $75
January 14
100 @ $47
January 23
75 @ $76
January 25
100 @ $48
January 30
75 @ $77
Tool City does not maintain perpetual inventory records. According to a physical count, 150 cordless screwdrivers were on hand at January 31, 2015.
a. What is the cost of the inventory at January 31, 2015 under the FIFO method?
b. What is the cost of the inventory at January 31, 2015 under the LIFO method?
c. What is the cost of the inventory at January 31, 2015 under the FIFO method if only 145 cordless screwdrivers were on hand at the time of the physical count?
