1460T_c09.qxd01:19:200611:19 AM Page452 EQA 452 Chapter 9 Inventories:Additional Valuation Issues (L01, BE9-2 Robin Corporation has the following four items in its ending inventory. Replacement Net Realizable NRV Less Item Cost Cost Value (NRV) Normal Profit Margin Jokers $2.000 $1,900 $2,100 $1.600 Penguins 5.000 5,100 4,950 4,100 Riddlers 4,400 4,550 4,625 3,700 Scarecrows 3.200 2,990 3.830 3.070 Determine the final lower-of-cost-or-market inventory value for each item. (L0 1,BE9-3 Battletoads Inc.uses a perpetual inventory system.At January 1,2008,inventory was $214,000 at both 2) cost and market value.At December 31,2008,the inventory was $286,000 at cost and $269,000 at mar- ket value.Prepare the necessary December 31 entry under (a)the direct method and (b)the indirect method. (L0 3)BE9-4 PC Plus buys 1,000 computer game CDs from a distributor who is discontinuing those games The purchase price for the lot is $6,000.PC Plus will group the CDs into three price categories for resale, as indicated below. Group No.of CDs Price per CD 1 100 $5.00 2 800 10.00 100 15.00 Determine the cost per CD for each group,using the relative sales value method. (L04) BE9-5 Beavis Company signed a long-term noncancelable purchase commitment with a major supplier to purchase raw materials in 2008 at a cost of $1,000,000.At December 31,2007,the raw materials to be purchased have a market value of $930,000.Prepare any necessary December 31 entry. (L0 4)BE9-6 Use the information for Beavis Company from BE9-5.In 2008,Beavis paid $1,000,000 to obtair the raw materials which were worth $930,000.Prepare the entry to record the purchase. (L05) BE9-7 Big Hurt Corporation's April 30 inventory was destroyed by fire.January 1 inventory was $150,000,and purchases for January through April totaled $500,000.Sales for the same period were $700,000.Big Hurt's normal gross profit percentage is 31%on sales.Using the gross profit method,esti- ⊕ mate Big Hurt's April 30 inventory that was destroyed by fire. (L0 6)BE9-8 Bimini Inc.had beginning inventory of $12,000 at cost and $20,000 at retail.Net purchases were $120,000 at cost and $170,000 at retail.Net markups were $10,000;net markdowns were $7,000;and sales were $157,000.Compute ending inventory at cost using the conventional retail method. (LO 7)BE9-9 In its 2004 annual report,Wal-Mart reported inventory of $26,612 million on January 31,2004, and $24,401 million on January 31,2003,cost of sales of $198,747 million for fiscal year 2004,and net sales of $256,329 million.Compute Wal-Mart's inventory turnover and the average days to sell inventory for the fiscal year 2004. (L0 8)*BE9-10 Use the information for Bimini Inc.from BE9-8.Compute ending inventory at cost using the LIFO retail method. (LO 8)BE9-11 Use the information for Bimini Inc.from BE9-8,and assume the price level increased from 100 at the beginning of the year to 120 at year-end.Compute ending inventory at cost using the dollar-value LIFO retail method. PLUS EXERCISES (L0 1,E9-1 (Lower-of-Cost-or-Market)The inventory of 3T Company on December 31,2008,consists of the 2) following items. Part No. Quantity Cost per Unit Cost to Replace per Unit 110 600 $90 $100 111 1,000 60 52 112 500 80 76 113 200 170 180 120 400 205 208 1214 1.600 16 14 122 300 240 235 Part No.121 is obsolete and has a realizable value of $0.20 each as scrap.BE9-2 Robin Corporation has the following four items in its ending inventory. Replacement Net Realizable NRV Less Item Cost Cost Value (NRV) Normal Profit Margin Jokers $2,000 $1,900 $2,100 $1,600 Penguins 5,000 5,100 4,950 4,100 Riddlers 4,400 4,550 4,625 3,700 Scarecrows 3,200 2,990 3,830 3,070 Determine the final lower-of-cost-or-market inventory value for each item. BE9-3 Battletoads Inc. uses a perpetual inventory system. At January 1, 2008, inventory was $214,000 at both cost and market value. At December 31, 2008, the inventory was $286,000 at cost and $269,000 at mar￾ket value. Prepare the necessary December 31 entry under (a) the direct method and (b) the indirect method. BE9-4 PC Plus buys 1,000 computer game CDs from a distributor who is discontinuing those games. The purchase price for the lot is $6,000. PC Plus will group the CDs into three price categories for resale, as indicated below. Group No. of CDs Price per CD 1 100 $ 5.00 2 800 10.00 3 100 15.00 Determine the cost per CD for each group, using the relative sales value method. BE9-5 Beavis Company signed a long-term noncancelable purchase commitment with a major supplier to purchase raw materials in 2008 at a cost of $1,000,000. At December 31, 2007, the raw materials to be purchased have a market value of $930,000. Prepare any necessary December 31 entry. BE9-6 Use the information for Beavis Company from BE9-5. In 2008, Beavis paid $1,000,000 to obtain the raw materials which were worth $930,000. Prepare the entry to record the purchase. BE9-7 Big Hurt Corporation’s April 30 inventory was destroyed by fire. January 1 inventory was $150,000, and purchases for January through April totaled $500,000. Sales for the same period were $700,000. Big Hurt’s normal gross profit percentage is 31% on sales. Using the gross profit method, esti￾mate Big Hurt’s April 30 inventory that was destroyed by fire. BE9-8 Bimini Inc. had beginning inventory of $12,000 at cost and $20,000 at retail. Net purchases were $120,000 at cost and $170,000 at retail. Net markups were $10,000; net markdowns were $7,000; and sales were $157,000. Compute ending inventory at cost using the conventional retail method. BE9-9 In its 2004 annual report, Wal-Mart reported inventory of $26,612 million on January 31, 2004, and $24,401 million on January 31, 2003, cost of sales of $198,747 million for fiscal year 2004, and net sales of $256,329 million. Compute Wal-Mart’s inventory turnover and the average days to sell inventory for the fiscal year 2004. *BE9-10 Use the information for Bimini Inc. from BE9-8. Compute ending inventory at cost using the LIFO retail method. *BE9-11 Use the information for Bimini Inc. from BE9-8, and assume the price level increased from 100 at the beginning of the year to 120 at year-end. Compute ending inventory at cost using the dollar-value LIFO retail method. EXERCISES E9-1 (Lower-of-Cost-or-Market) The inventory of 3T Company on December 31, 2008, consists of the following items. Part No. Quantity Cost per Unit Cost to Replace per Unit 110 600 $90 $100 111 1,000 60 52 112 500 80 76 113 200 170 180 120 400 205 208 121a 1,600 16 14 122 300 240 235 a Part No. 121 is obsolete and has a realizable value of $0.20 each as scrap. 452 • Chapter 9 Inventories: Additional Valuation Issues (L0 1, 2) (L0 1, 2) (L0 3) (L0 4) (L0 4) (L0 5) (L0 6) (L0 7) (L0 8) (L0 8) (L0 1, 2) 1460T_c09.qxd 01:19:2006 11:19 AM Page 452