Extra Problem
E6-12,13,14,15, E7-6, P9-9
Exercise 6-12
Annuity = $20,000 – 5,000 = $670 = Payment
22.39646*
* Present value of an ordinary annuity of $1: n=30, i=2% (from Table 4)
Exercise 6-13
PVA factor = $100,000 = 7.46938*
$13,388
* Present value of an ordinary annuity of $1: n=20, i=? (from Table 4, i =
approximately 12%)
Exercise 6-14
Annuity =
$12,000
= $734 = Payment
16.35143*
* Present value of an ordinary annuity of $1: n=20, i=2% (from Table 4)
5 years x 4 quarters = 20 periods
8% ÷ 4 quarters = 2%
Exercise 6-15
PV = $12,000,0001 (17.15909* ) + 300,000,000 (.14205** )
PV = $205,909,080 + 42,615,000 = $248,524,080 = price of the
bonds
1
$300,000,000 x 4 % = $12,000,000
* Present value of an ordinary annuity of $1: n=40, i=5% (from Table 4)
** Present value of $1: n=40, i=5% (from Table 2)
Exercise 7-6
Requirement 1
To record the actual sales returns
Allowance for sales returns ............................................ 450,000
Accounts receivable ...................................................
450,000
December 31, 2009
To record the estimated sales returns
Sales returns (4% x $11,500,000) ....................................... 460,000
Allowance for sales returns .......................................
460,000
Inventory-estimated returns ........................................... 299,000
Cost of goods sold (65% x $460,000) ............................
299,000
Requirement 2
Beginning balance in allowance account
Add: Year-end estimate
Less: Actual returns
Ending balance in allowance account
$300,000
460,000
(450,000)
$310,000
Problem 9-9
Sales to employees must be deducted in the retail column at their gross
amount.
2009:
$2,400
= $3,000 = Gross sales to employees
.80
Beginning inventory
Plus: Net purchases
Freight-in
Net markups
Less: Net markdowns
Goods available for sale (excluding beginning inventory)
Goods available for sale (including beginning inventory)
Cost
$28,000
85,000
2,000
______
87,000
115,000
Retail
$ 40,000
108,000
10,000
(2,000)
116,000
156,000
$ 87,000
Cost-to-retail percentage:
= 75%
$116,000
Less: Net sales ($100,000 + 3,000)
Estimated ending inventory at current year retail prices
Estimated ending inventory at cost (below)
Estimated cost of goods sold
(103,000)
$ 53,000
(35,950)
$79,050
___________________________________________________________________________
Ending
Inventory
at Year-end
Retail Prices
Step 1
Ending
Inventory
at Base Year
Retail Prices
Step 2
Inventory
Layers
at Base Year
Retail Prices
Step 3
Inventory
Layers
Converted to
Cost
$53,000
$53,000
(above)
= $50,000
1.06
$40,000 (base)
10,000 (2009)
x 1.00 x 70%
x 1.06 x 75%
Total ending inventory at dollar-value LIFO retail cost ............
=
=
$28,000
7,950
$35,950
Problem 9-9 (concluded)
2010:
$4,000
= $5,000 = Gross sales to employees
.80
Beginning inventory
Plus: Net purchases
Freight-in
Net markups
Less: Net markdowns
Goods available for sale (excluding beginning inventory)
Goods available for sale (including beginning inventory)
Cost
$35,950
90,000
2,500
______
92,500
128,450
Retail
$ 53,000
114,000
8,000
(2,200)
119,800
172,800
$ 92,500
Cost-to-retail percentage:
= 77.21%
$119,800
Less: Net sales ($104,000 + 5,000)
Estimated ending inventory at current year retail prices
Estimated ending inventory at cost (below)
Estimated cost of goods sold
(109,000)
$ 63,800
(42,744)
$85,706
___________________________________________________________________________
Ending
Inventory
at Year-end
Retail Prices
Step 1
Ending
Inventory
at Base Year
Retail Prices
Step 2
Inventory
Layers
at Base Year
Retail Prices
Step 3
Inventory
Layers
Converted to
Cost
$63,800
$63,800
(above)
= $58,000
1.10
$40,000 (base)
10,000 (2009)
8,000 (2010)
x 1.00 x 70% =
x 1.06 x 75% =
x 1.10 x 77.21% =
Total ending inventory at dollar-value LIFO retail cost ............
$28,000
7,950
6,794
$42,744