ch09_sol

Instructions for the Microsoft Excel Templates by Rex A Schildhouse

Extensive detail and information is contained within the help function of Microsoft Excel and in the provided text.

And information or data which may be required by the solution will be entered in cells with borders to help identify them.

Be advised, the template workbooks and worksheets are not protected.Overtyping any data may remove it.

You should enter your name, date, instructor's name, and course into the cells at the top of the page. This information will be printed on the top of each page if the template requires more than one page.

Each template is set to print with File Name, Page # of # Page(s), the print date, and the print time to assist in assembly of multiple pages.

If more than one page is required by the template, manual page breaks have been set to provide consistent presentation.

All of the cells have been correctly formatted for presentation and should not require any adjustment. For example, if the text requires one, two, or three significant digits in a presentation, the template has been set for that presentation in the appropriate cells.

In general, the yellow highlighted cells are the cells which work and effort should be presented. These entries may include date(s), account title(s), values, memorandum appropriate to the entry, or text answers to questions.

Where a yellow highlighted cell shows "Date" enter the appropriate date for that step of the challenge. This may be any date format that Microsoft Excel accepts. Some of these formats include "1/1/12", "01/01/12", and "01/01/2012." All of these will return January 01, 2012, in the format set in the template.

Where a yellow highlighted cell shows "Acct Nbr" enter the appropriate account number, provided in the template and in the text for that step of the challenge. This is entry may be a "Look to" formula to another cell where that information has been provided or previously entered.

Where a yellow highlighted cell shows "Account Title" enter the appropriate account title for that step of the challenge. This is a text entry and most of those cells are set for the proper indentation for that step. Frequently the chart of accounts appropriate to the challenge is provided and you can use the "look to" formula to reference the appropriate account title without typing it.

Check with your instructor to see if abbreviated account titles are acceptable. For example "A/R" for Accounts Receivable, "A/P" for Accounts Payable. If your instructor is using a comparison process between workbooks for grading, these abbreviates may not be acceptable.

Where a yellow highlighted cell shows titles such as "Values," "Amounts," or "Quantities" enter the appropriate numerical value for that step of the challenge. The cell is formatted for proper presentation of the entered information. If a dollar sign is appropriate, it should not be entered, Microsoft Excel will place it there through formatting. Commas and significant digits (decimals) are also set through formatting for common presentation. Since the formatting of the templates is not protected by any password, you may change any of the formatting found in the templates to meet your desires.

Where a yellow highlighted cell shows titles such as "Formula" you may enter the appropriate formula or enter a numerical value appropriate for that step of the challenge. Most of the values necessary for the appropriate formula are located on the template in cells with borders or in other yellow highlighted cells. The formula may be a simple "Look to" formula, an equal sign and a cell reference, "=E27" or more complex as "=E27*5," or something similar to the time-value-of-money formula. These are addressed in the tutorial text provided for Microsoft Excel.

Where a yellow highlighted cell shows "Text" enter the appropriate text for that step of the challenge. This may be a memorandum entry for a journal entry or a lengthy text answer discussing the results of an analysis of a company's financials. These titles can simply be typed over.

Where a yellow highlighted cell shows titles such as "Journal Number" or "Journ #" you should enter the appropriate number provided in the template and in the text for that step of the challenge. In general this will appear in instances such as "Record the following events in General Journal number six."

The print area is defined to fit onto 8 1/2" × 11" sheets in portrait or landscape mode as required. Margins are generally set to no less than 1/2" so most printers can print them without a problem. If you printer cannot accept margins less than 1" you may have to reformat the margins through Page Setup.

The display may have "Freeze Pane" invoked so column titles remain visible during data entry. This can be removed by utilizing the View menu and selecting "Unfreeze Panes" under "Freeze Panes."

When negative values are required, enter them by starting with a minus sign, "-". Negative values may be shown as ($400) or -$400. Negative values in formulas can be created by putting a minus sign in front of the cell reference - "=E10*-E11" will return a negative value if both cells E10 and E11 contain positive values.

Microsoft Office and Microsoft Excel are products of, and copyrighted by,Microsoft Corporation, One Microsoft Way, Redmond, Washington 98052-6399

document.xlsx, Exercise 9-1 Solution, of 12, 04/17/2023, 22:19:04

Name: Solution Date:

Instructor: Course:

Part No. Quantity Cost Per Unit Cost to Replace per Unit110 600 $95 $100.00 111 1,000 60 $52.00 112 500 80 $76.00 113 200 170 $180.00 120 400 205 $208.00 121 1,600 16 $14.00 122 300 240 $235.00

Part No. 121 is obsolete and has a realizable value of each as scrap: $0.50

Part No. Quantity Market Total Cost

110 600 $95 $100.00 $57,000 $60,000 $57,000 111 1,000 60 52.00 60,000 52,000 52,000 112 500 80 76.00 40,000 38,000 38,000 113 200 170 180.00 34,000 36,000 34,000 120 400 205 208.00 82,000 83,200 82,000 121 1,600 16 14.00 25,600 800 800 122 300 240 $235.00 72,000 70,500 70,500

Totals $370,600 $340,500 $334,300

Instructions:

$334,300

$340,500

Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield

Primer on Using Excel in Accounting by Rex A Schildhouse

E9-1 (Lower-of-Cost-or-Market) The inventory of Oheto Company on December 31, 2013, consists of the following items.

Per UnitCost

TotalMarket

Lower ofCost orMarket

Complete the table above by inserting the correct values or formulas into the yellow highlighted cells. From this data, answer the following two questions:

(a) Determine the inventory as of December 31, 2013, by the lower-of-cost-or-market method, applying this method directly to each item.

The valuation of inventory as of December 31, 2013, by the lower of cost or market method, as applied directly to each item is:

(b) Determine the inventory by the lower-of-cost-or-market method, applying the method to the total of the inventory.

The valuation of inventory as of December 31, 2013, by the lower of cost or market method, as applied to total inventory is:

document.xlsx, Exercise 9-1, of 12, 04/17/2023, 22:19:04

Name: Date:

Instructor: Course:

Part No. Quantity Cost Per Unit Cost to Replace per Unit110 600 $95 $100.00 111 1,000 60 $52.00 112 500 80 $76.00 113 200 170 $180.00 120 400 205 $208.00 121 1,600 16 $14.00 122 300 240 $235.00

Part No. 121 is obsolete and has a realizable value of each as scrap: $0.50

Part No. Quantity Market Total Cost

110 600 $95 $100.00 Formula Formula Formula111 1,000 60 52.00 Formula Formula Formula112 500 80 76.00 Formula Formula Formula113 200 170 180.00 Formula Formula Formula120 400 205 208.00 Formula Formula Formula121 1,600 16 14.00 Formula Formula Formula122 300 240 $235.00 Formula Formula Formula

Totals Formula Formula Formula

Instructions:

Value

Value



E9-1 (Lower-of-Cost-or-Market) The inventory of Oheto Company on December 31, 2013, consists of the following items.

Per UnitCost

TotalMarket

Lower ofCost orMarket

Complete the table above by inserting the correct values or formulas into the yellow highlighted cells. From this data, answer the following two questions:

(a) Determine the inventory as of December 31, 2013, by the lower-of-cost-or-market method, applying this method directly to each item.

The valuation of inventory as of December 31, 2013, by the lower of cost or market method, as applied directly to each item is:

(b) Determine the inventory by the lower-of-cost-or-market method, applying the method to the total of the inventory.

The valuation of inventory as of December 31, 2013, by the lower of cost or market method, as applied to total inventory is:

document.xlsx, Exercise 9-7 Solution, of 12, 04/17/2023, 22:19:04


Instructor: Course:

$55,000 . This land was improved and subdivided into building lots at an additional cost of $30,000

Group No. of Lots Price per Lot1 9 $3,000 2 15 $4,000 3 19 $2,000

Operating expenses for the year allocated to this project total $18,200 Lots unsold at the year-endas follows:

Group No. of Lots1 5 2 7 3 2

Instructions:

Group No. of lots Cost total Cost per lot1 9 $3,000 $27,000 22% $85,000 $18,360 $2,040 2 15 4,000 60,000 48% 85,000 $40,800 $2,720 3 19 2,000 38,000 30% 85,000 $25,840 $1,360

$125,000 100% $85,000

Lots Sold

Group No. of Lots Cost per lot Gross Profit1 4 $3,000 $12,000 $2,040 $8,160 $3,840 2 8 4,000 32,000 2,720 21,760 $10,240 3 17 2,000 34,000 1,360 23,120 10,880

29 $78,000 $53,040 $24,960

Sales (see schedule) $78,000 Cost of goods sold (see schedule) 53,040 Gross profit 24,960 Operating expenses 18,200 Net income $6,760



E9-7 (Relative Sales Value Method) Larsen Realty Corporation purchased a tract of unimproved land for

These building lots were all of the same size but owing to differences in location were offered for sale at different prices as follows.

At the end of the fiscal year Larsen Realty Corporation instructs you to arrive at the net income realized on this operation to date.

Sales priceper lot

Totalsales price

Relative sales

price as %Cost allocated

to lots

Priceper lot

Total selling price

Extendedcost

document.xlsx, Exercise 9-7, of 12, 04/17/2023, 22:19:04

Name: Date:

Instructor: Course:

$55,000 . This land was improved and subdivided into building lots at an additional cost of $30,000

Group No. of Lots Price per Lot1 9 $3,000 2 15 $4,000 3 19 $2,000

Operating expenses for the year allocated to this project total $18,200 Lots unsold at the year-endas follows:

Group No. of Lots1 5 2 7 3 2

Instructions:

Group No. of lots Cost total Cost per lot1 Number Amount Amount Formula Amount Formula Formula2 Number Amount Amount Formula Amount Formula Formula3 Number Amount Amount Formula Amount Formula Formula

Formula Formula Formula

Lots Sold

Group No. of Lots Cost per lot Gross Profit1 Number Amount Formula Amount Formula Formula2 Number Amount Formula Amount Formula Formula3 Number Amount Formula Amount Formula Formula

Formula Formula Formula Formula

Sales (see schedule) AmountCost of goods sold (see schedule) AmountGross profit FormulaOperating expenses AmountNet income Formula



E9-7 (Relative Sales Value Method) Larsen Realty Corporation purchased a tract of unimproved land for

These building lots were all of the same size but owing to differences in location were offered for sale at different prices as follows.

At the end of the fiscal year Larsen Realty Corporation instructs you to arrive at the net income realized on this operation to date.

Sales priceper lot

Totalsales price

Relative sales

price as %Cost allocated

to lots

Priceper lot

Total selling price

Extendedcost

document.xlsx, Problem 9-2 Solution, of 12, 04/17/2023, 22:19:04


Instructor: Course:

At May 31, 2012, the balance in Garcia’s Raw Material Inventory account was $408,000 and the Allowance to Reduce Inventory to Market had a credit balance of $27,500 Alcide summarized the relevant inventory cost and market data at May 31, 2012, in the schedule below.

Cost Sales Price Normal ProfitAluminum siding $70,000 $62,500 $64,000 $56,000 $5,100 Cedar shake siding 86,000 79,400 94,000 84,800 7,400 Louvered glass doors 112,000 124,000 186,400 168,300 18,500 Thermal windows 140,000 126,000 154,800 140,000 15,400

Total $408,000 $391,900 $499,200 $449,100 $46,400

Instructions:

Calculations of Proper Balance on the Allowance to Reduce Inventory to Market At May 31, 2012.

Cost LCMAluminum siding $70,000 $62,500 $56,000 $50,900 $56,000 Cedar shake siding $86,000 $79,400 $84,800 77,400 $79,400 Louvered glass doors $112,000 $124,000 $168,300 149,800 $112,000 Thermal windows $140,000 $126,000 $140,000 124,600 $126,000 Totals $408,000 $391,900 $449,100 $402,700 $373,400

Inventory cost $408,000 LCM valuation 373,400 Allowance at May 31, 2012 $34,600



P9-2 (Lower-of-Cost-or-Market) Garcia Home Improvement Company installs replacement siding, windows, and louvered glass doors for single-family homes and condominium complexes in northern New Jersey and southern New York. The company is in the process of preparing its annual financial statements for the fiscal year ended May 31, 2012, and Jim Alcide, controller for Garcia, has gathered the following data concerning inventory.

Alcide assigned Patricia Devereaux, an intern from a local college, the task of calculating the amount that should appear on Garcia’s May 31, 2012, financial statements for inventory under the lower-of-cost-or-market rule as applied to each item in inventory. Devereaux expressed concern over departing from the cost principle.

ReplacementCost

Net Realizable

Value

(a) (1) Determine the proper balance in the Allowance to Reduce Inventory to Market at May 31, 2012.

ReplacementCost

NRV(Ceiling)

NRV lessnormal profit

(Floor)



Instructor: Course:

Balance prior to adjustment $27,500 Required balance 34,600 Loss to be recorded ($7,100)

(a) (2) For the fiscal year ended May 31, 2012, determine the amount of the gain or loss that would be recorded due to the change in the Allowance to Reduce Inventory to Market.

For the fiscal year ended May 31, 2010, the loss that would be recorded due to the change in the Allowance to Reduce Inventory to Market would be $7,100, as calculated below.

(b) Explain the rationale for the use of the lower of cost or market rule as it applies to inventories.

The use of the lower of cost or market (LCM) rule is based on both the matching principle and the concept of conservatism. The matching principle applies because the application of the LCM rule allows for the recognition of a decline in the utility (value) of inventory as a loss in the period in which the decline takes place.

The departure from the cost principle for inventory valuation is permitted on the basis of conservatism. The general rule is that the historical cost principle is abandoned when the future utility of an asset is no longer as great as its original cost.

document.xlsx, Problem 9-2, of 12, 04/17/2023, 22:19:04

Name: Date:

Instructor: Course:

At May 31, 2012, the balance in Garcia’s Raw Material Inventory account was $408,000 and the Allowance to Reduce Inventory to Market had a credit balance of $27,500 Alcide summarized the relevant inventory cost and market data at May 31, 2012, in the schedule below.

Cost Sales Price Normal ProfitAluminum siding $70,000 $62,500 $64,000 $56,000 $5,100 Cedar shake siding 86,000 79,400 94,000 84,800 7,400 Louvered glass doors 112,000 124,000 186,400 168,300 18,500 Thermal windows 140,000 126,000 154,800 140,000 15,400

Total $408,000 $391,900 $499,200 $449,100 $46,400

Instructions:

Calculations of Proper Balance on the Allowance to Reduce Inventory to Market At May 31, 2012.

Cost LCMAluminum siding Amount Amount Amount Amount AmountCedar shake siding Amount Amount Amount Amount AmountLouvered glass doors Amount Amount Amount Amount AmountThermal windows Amount Amount Amount Amount AmountTotals Formula Formula Formula Formula Formula

Inventory cost AmountLCM valuation AmountAllowance at May 31, 2012 Formula



P9-2 (Lower-of-Cost-or-Market) Garcia Home Improvement Company installs replacement siding, windows, and louvered glass doors for single-family homes and condominium complexes in northern New Jersey and southern New York. The company is in the process of preparing its annual financial statements for the fiscal year ended May 31, 2012, and Jim Alcide, controller for Garcia, has gathered the following data concerning inventory.

Alcide assigned Patricia Devereaux, an intern from a local college, the task of calculating the amount that should appear on Garcia’s May 31, 2012, financial statements for inventory under the lower-of-cost-or-market rule as applied to each item in inventory. Devereaux expressed concern over departing from the cost principle.

ReplacementCost

Net Realizable

Value

(a) (1) Determine the proper balance in the Allowance to Reduce Inventory to Market at May 31, 2012.

ReplacementCost

NRV(Ceiling)

NRV lessnormal profit

(Floor)


Name: Date:

Instructor: Course:

Enter text answer here as appropriate.

Balance prior to adjustment AmountRequired balance AmountLoss to be recorded Formula



(a) (2) For the fiscal year ended May 31, 2012, determine the amount of the gain or loss that would be recorded due to the change in the Allowance to Reduce Inventory to Market.

(b) Explain the rationale for the use of the lower of cost or market rule as it applies to inventories.



Instructor: Course:

Inventory, January 1, at retail: $25,000 at cost: $17,000 Purchases in January, at retail: 137,000 at cost: 82,500 Freight-in, 7,000 Purchases returns, at retail: 3,000 at cost: 2,300 Transfers in from suburban branch, at retail: 13,000 at cost: 9,200 Net markups: 8,000 Net markdowns: 4,000 Inventory losses due to normal breakage, etc, a at retail: 400 Sales at retail: 95,000 Sales returns: 2,400

Instructions:

Cost RetailBeginning Inventory $17,000 $25,000 Purchases 82,500 137,000 Freight-in 7,000 Purchase returns (2,300) (3,000)Transfers in from suburban branch 9,200 13,000

113,400 172,000 Net markups 8,000

180,000 Net markdowns (4,000)Sales ($95,000)Sales returns 2,400 Net sales (92,600)Inventory losses due to breakage (400)Ending inventory at retail $83,000

Cost-to-retail ratio =$113,400

= 63.0%$180,000

Ending inventory at lower of average cost or market $83,000 × 63.0% = $52,290

Note: Due to significant digits of worksheets and calculators, small differences may occur.



P9-6 (Retail Inventory Method) The records for the Clothing Department of Sharapova’s Discount Store are summarized below for the month of January.

(a) Compute the inventory for this department as of January 31, at Retail

(b) Compute the inventory for this department as of January 31, at lower of average cost or market.


Name: Date:

Instructor: Course:

Inventory, January 1, at retail: $25,000 at cost: $17,000 Purchases in January, at retail: 137,000 at cost: 82,500 Freight-in, 7,000 Purchases returns, at retail: 3,000 at cost: 2,300 Transfers in from suburban branch, at retail: 13,000 at cost: 9,200 Net markups: 8,000 Net markdowns: 4,000 Inventory losses due to normal breakage, etc, a at retail: 400 Sales at retail: 95,000 Sales returns: 2,400

Instructions:

Cost RetailBeginning Inventory Amount AmountTitle Amount AmountTitle AmountTitle Amount AmountTransfers in from suburban branch Amount Amount

Formula FormulaNet markups Amount

FormulaNet markdowns AmountTitle AmountTitle AmountTitle FormulaTitle AmountEnding inventory at retail Formula

Cost-to-retail ratio =Value

= FormulaValue

Ending inventory at lower of average cost or market Value Percentage Formula

Note: Due to significant digits of worksheets and calculators, small differences may occur.



P9-6 (Retail Inventory Method) The records for the Clothing Department of Sharapova’s Discount Store are summarized below for the month of January.

(a) Compute the inventory for this department as of January 31, at Retail

(b) Compute the inventory for this department as of January 31, at lower of average cost or market.

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