7

CHAPTER 7
Problem 7-1
roblem 7-5
1.
1.
2.
2.
3.
3.
4.
4.
5.
5.
6.
6.
7.
7.
8.
8.
9.
9.
10.
Problem 7-2
Problem 7-3
Problem 7-4
1. D
1. B
1. D
2. D
2. A
2. C
3. A
3. A
3. C
4. C
4. C
4. A
5. D
5. C
5. A
6. A
6. D
6. C
7. D
7. C
7. A
8. A
8. A
8. C
9. A
9. A
9. A
C
B
B
D
A
D
C
D
D
D
D
C
A
A
B
A
B
A
10. B
10. D
10. A
Problem 7-6
Items counted in the bodega
4,000,000
Items included in count specifically segregated per sales contract
( 100,000)
Items returned by customer
50,000
Items ordered and in receiving department
400,000
Items shipped today, FOB destination
150,000
Items for display
200,000
Items on counter for sale
800,000
Damaged and unsalable items included in count
( 50,000)
Items in shipping department
250,000
5,700,000
Problem 7-7
Materials
1,400,000
Goods in process
650,000
Finished goods in factory
2,000,000
Finished goods in company-owned retail store (750,000/150%)
500,000
Finished goods in the hands of consignees (400,000 x 60%)
10. C
240,000
Finished goods in transit
250,000
Finished goods out on approval
100,000
Materials in transit (330,000 + 30,000)
360,000
Correct inventory
5,500,000
Problem 7-8
Finished goods
2,000,000
Finished goods held by salesmen
100,000
Goods in process (720,000/80%)
900,000
Materials
1,000,000
Materials returned to suppliers for replacement
100,000
Factory supplies (110,000 + 60,000)
170,000
Correct inventory
4,270,000
89
Problem 7-9
1. Inventory
50,000
Income summary
50,000
2. Accounts payable
Purchases
75,000
75,000
3. Purchases
30,000
Accounts payable
30,000
Inventory
Income summary
30,000
4. Income summary
Inventory
90,000
5. Purchases
90,000
140,000
Accounts payable
140,000
Problem 7-10
1. EXCLUDE
30,000
The term of the shipment is FOB destination.
2. EXCLUDE
The goods are held only for consignment.
3. INCLUDE
There is no perfected sale yet as of December 31, 2008.
4. INCLUDE
.
The term FOB supplier s warehouse is synonymous with FOB shipping point
5. EXCLUDE
ically
There is already a constructive delivery since the article was specif

made according to the customer s specifications and the art
icle is already
completed on December 31, 2008.
Problem 7-11
Inventory before adjustment
7,600,000
Goods out on consignment
1,000,000
Goods purchased FOB shipping point
250,000
Goods sold FOB shipping point
850,000)
Goods sold FOB destination
260,000
Goods sold FOB destination
840,000
Correct December 31 inventory
9,100,000
90
Problem 7-12
Inventory per book
950,000
Item 3 (18,500 1,000 / 140%)
12,500
Item 4 (50,000 + 2,500)
52,500
Item 5 (35,000 / 140% = 25,000 + 2,000)
27,000
Adjusted inventory
1,042,000
Problem 7-13
Requirement a
Periodic System
Perpetual System
1. Purchases
y
800,000
Accounts payable
ounts payable
800,000
1. Merchandise inventor
800,000
800,000
Acc
2. Accounts payable
50,000
Purchase returns
chandise inventory
3. Accounts payable
600,000
Cash
600,000
4. Accounts receivable
1,580,000
Sales
1,580,000
50,000
50,000
Mer
50,000
600,000
3. Accounts payable
600,000
1,580,000
Cash
4. Accounts receivable
1,580,000
5. Sales return
40,000
790,000
Accounts receivable
inventory
790,000
6. Cash
2. Accounts payable
1,360,000
40,000
Accounts receivable
eivable
40,000
7. Inventory-Dec. 31
60,000
ory
20,000
Income summary
s
20,000
(60 x 1,000)
Sales
Cost of sales
40,000
Merchandise
5. Sales return
1,360,000
Accounts rec
Merchandise invent
60,000
Cost of sale
6. Cash
1,360,000
Accounts receivable
1,360,000
7. Inventory shortage
10,000
Merchandise inventor
y
10,000
Merchandise inventory per
book
70,000
Physical count
Shortage
60,000
10,000
Requirement b
Periodic System
System
January
Inventory
Purchases
800,000
0,000)
770,000
Purchase returns
(
y shortage
10,000
Goods available for sale
sales
780,000
Less: Inventory
December 31
Cost of sales
Perpetual
90,000
Cost of sales recorded

(790,000
50,000)
750,000
840,000
60,000
780,000
Inventor
Adjusted cost of
91
Problem 7-14
Company A
List price
500,000
Less: First trade discount (20% x 500,000)
100,000
400,000
Second trade discount (10% x 400,000)
40,000
360,000
Third trade discount (10% x 360,000)
36,000
Invoice price
324,000
Less: Cash discount (2% x 324,000)
6,480
Payment within the discount period
317,520
Company B
List price
500,000
Less: Trade discount (35% x 500,000)
175,000
Invoice price
325,000
Less: Cash discount (2% x 325,000)
6,500
Payment within the discount period
318,500
Problem 7-15
Requirement a
Gross method
Net method
1. Purchases
655,000
Accounts payable
nts payable
2. Freight in
250,000
Cash
4,750,000
1. Purchases
4,
4,750,000
Accou
4,655,000
250,000
2. Freight in
250,000
Cash
250,000
3. Accounts payable
17,000
Cash
1,617,000
Purchase discount
Accounts payable
1,650,000
3. Accounts payable
1,617,000
1,6
Cash
33,000
2,100,000
Accounts payable
2,0
58,000
lost
Cash
42,000
2,100,000
Purchase discount
Cash
2,100,000
4. No entry
20,000
4. Purchase discount lost

Accounts payable
20,000
(1,000,000 x 2%)
5. Inventory
1,000
Income summary
y
1,000,000
5. Inventory
1,000,000
98
Income summar
981,000
92
Requirement b
Gross method
Net method
Purchases
4,655,000
Freight in
250,000
Total
4,905,000
Less: Purchase discounts
-___
4,905,000
Less: Inventory
December 31
981,000
Cost of sales
3,924,000
Ending inventory:
Gross (5,000,000/5)
0,000
Net (4,905,000/5)
981,000
4,750,000
250,000
5,000,000
33,000
4,967,000
1,000,000
3,967,000
1,00
Problem 7-16
Gross method
Sept. 1
Purchases
650,000
Accounts payable
650,000
1
Freight in
20,000
Accounts payable
20,000
7
Accounts payable
Purchase returns and allowances
10,000
Oct. 1
10,000
Accounts payable
Cash
660,000
660,000
Net method
Sept. 1
Purchases
637,000
Accounts payable
637,000
1
Freight in
20,000
Accounts payable
20,000
7
Accounts payable (10,000 x 98%)

Purchase returns and allowances
9,800
Oct. 1
9,800
Accounts payable (657,000

9,800)
Purchase discount lost (2% x 640,000)
Cash
660,000
647,200
12,800
93
Problem 7-17
Gross method
Net method
1. Merchandise inventory
980,000
Accounts payable
ts payable
2. Accounts payable
le
50,000
Cash
50,000
1,000,000
1. Merchandise inventory
1,000,000
Accoun
980,000
50,000
2. Accounts payab
50,000
3. Accounts payable
le
784,000
Cash
x 98%)
784,000
Cost of sales
800,000
4. Accounts payable
le
146,000
Cash
150,000
Cash
3. Accounts payab
784,000
Cash (800,000
16,000
4. Accounts payab
150,000
Purchase discount los
4,000
Cash
150,000
5. Cash
1,200,000
Sales
1,200,000
1,200,000
5. Cash
1,200,000
Cost of sales
of sales
686,000
Merchandise inventory
dise inventory
686,000
(1,000,000 x 70%)
Sales
700,000
Cost
700,000
Merchan
(980,000 x 70%)
Problem 7-18
Units
cost
1. FIFO - periodic
Lot No. 4
100
90
Unit
Total cost
500
50,000
5
1,305,000
14,500
15,000
1,355,000
2. Beginning inventory
800,000
Purchases: Lot No. 1
100
200,000
110
880,000
120
720,000
100
950,000
10,000
80
2,000
8,000
6,000
9,500
14,500
90
1,305,000
4,855,000
Weighted average (4,855,000/50,000)
1,456,500
50,000
15,000
97.10
3. Specific identification
Lot 3
720,000
4
100
900,000
6,000
120
9,000
15,000
1,620,000
31
FIFO
Goods available
Inventory-Dec.
4,855,000
1,355,000
4,855,000
1,456,500
4,855,000
1,620,000
Cost of sales
3,500,000
Weighted average
3,398,500
Specific identification
3,235,000
94
Problem 7-19
Units
Unit cost
Total cost
FIFO
December 17
10,000
45
450,000
22
20,000
43
860,000
30,000
1,310,000
Average method
December 1
52
520,000
10,000
7
50
1,500,000
45
2,700,000
30,000
17
60,000
22
860,000
Available for sale
5,580,000
43
Inventory (5,580,000/120,000)
1,395,000
20,000
120,000
30,000
46.50
FIFO
Average
5,580,000
5,580,000
Less: Inventory
December 31
0
1,395,000
Cost of goods sold
4,270,000
4,185,000
1,310,00
Problem 7-20
The stock cards are not prepared anymore. The end results are simply given.
Units
Unit cost
Total cost
FIFO
Ending inventory
840,000
4,000
210
4,000
252.50
Cost of sales
2,700,000
Average method
Ending inventory
1,010,000
Cost of sales
2,530,000
Problem 7-21
Purchases
ory increment
Sales
Invent
2006
1,000
2007
2,000
2008
3,000
Total inventory
6,000
5,000
4,000
9,000
7,000
15,000
12,000
December 31, 2008 (units)
Sales
1,200,000
Cost of sales:
Inventory December 31, 2007 (3,000 x 60)
Purchases
000
000
Less: Inventory
December 31, 2008 (6,000 x 75)
,000
855,000
Gross income
345,000
180,000
1,125,
1,305,
450
95
Problem 7-22
Units
t
FIFO
October 1
Unit cos
Total cost
15,000
60
10,000
40
15,000
50
25,000
60
900,000
Weighted average periodic
January 1
400,000
April
1
750,000
October 1
1,500,000
2,650,000
Less: Sales
Ending inventory
795,000
50,000
35,000
15,000
15,000
53
Units
Unit cost
Total cost
Moving average perpetual
January 1
400,000
31
40
( 200,000)
Balance
200,000
April 1
50
750,000
Total
950,000
July 31
10,000
40
( 5,000)
5,000
40
15,000
20,000
47.50
(18,000)
47.50
Balance
855,000)
2,000
47.50
95,000
October 1
1,500,000
Total
1,595,000
December 31
( 708,840)
Balance
886,160
25,000
60__
27,000
59.07
(12,000)
59.07
15,000
59.07
FIFO
We
ighted average
Inventory
January 1
400,000
Purchases
2,250,000
2,250,000
2,650,000
Less: Inventory
December 31
795,000
Cost of sales
1,855,000
Cost of sales Weighted average perpetual
January
31 Sale
200,000
July
31 Sale
855,000
December 31 Sale
708,840
Total cost of sales
1,763,840
400,000
2,650,000
900,000
1,750,000
Problem 7-23
Units
cost
Total cost
FIFO
October 1 purchase
3,000,000
Unit
300
10,000
96
Units
cost
Total cost
Weighted average
January 1
1,500,000
April
5
2,700,000
October 1
10,000
5,000,000
9,200,000
Inventory December 31 (9,200,000/1,000)
2,760,000
Unit
200
7,500
300
9,000
500
1,000
300
9,200
FIFO
Weighted average
Inventory
January 1
1,500,000
Purchases
7,700,000
9,200,000
Less: Inventory
December 31
0
Cost of goods sold
6,440,000
Problem 7-24
1,500,000
7,700,000
9,200,000
3,000,000
2,760,00
6,200,000
Sales
6,000,000
Gross profit
(2,400,000)
Cost of goods sold
3,600,000
Inventory July 31 (see below)
928,000
Cost of goods available for sale
4,528,000
Purchases for July
(3,174,000)
Inventory July 1
1,354,000
Quantity
t
July 12
Unit cos
Total cost
1,000
60
60,000
25
62
FIFO inventory
928,000
Problem 7-25
14,000
868,000
July 31
1. Cost of units available for sale for July

1,452,100
Purchases for July
(1,042,100)
Cost of inventory
July 1
410,000
Number of units
102,500
2.
July 1 (410,000 / P4)
July 1 inventory
102,500
Purchases for July
200,000
Total units available for sale for July
302,500
July 31 inventory
( 60,000)
Units sold during the month of July
242,500
15,000
3. Average unit cost (1,452,100 / 302,500)

4.80
Inventory
July 31 (60,000 x 4.80)
288,000
Another computation (1,452,100
288,000
1,164,100)
97
Problem 7-26
Units
Average unit cost
1. Inventory
Total cost
December 31, 2007
2007 layer
1,518,000
2. Inventory December 31, 2006
1,480,000
Purchases
2007
1,656,000
Materials available
3,136,000
Less: Inventory
December 31, 2007
1,518,000
Raw materials used 2007
1,168,000
11,000
14,000
12,000
Problem 7-27
Available for sale
42,000
Units sold (2,800,000/100)
28,000
Ending inventory
14,000
138
26,000
11,000
15,000

2008 layer
2,295,000
1,518,000
Purchases
2008
3,060,000
Materials available
4,578,000
Less: Inventory
December 31, 2008
2,295,000
Raw materials used 2008
2,283,000
138
15,000
153
11,000
20,000
31,000
15,000
16,000
153
Units
it cost
Total cost
FIFO
September 5
86,000
25
42.50
510,000
Un
2,000
43.00
12,000
14,000
596,000
41.75
584,500
14,000
Average
FIFO
Available for sale
1,753,500
Less: Ending inventory
596,000
Cost of sales
69,000
1,157,500
1,753,500
584,500
1,1
(
Sch. 1)
(Sch. 2)
98
Problem 7-28
2006
2008
Cost of sales
Average
2,400,000
Understatement of ending inventory:
2006
0
2007
0,000)
200,000
2008
___
( 270,000)
Cost of sales FIFO
00
2,330,000
2008
Sales
00
4,800,000
Cost of sales FIFO
00
2,330,000
Gross income
00
2,470,000
Operating expenses
,000
1,000,000
Operating income
000
1,470,000
1,500,000
2007
2,000,000
( 150,000)
150,00
(
_______
20
_____
1,350,000
1,950,0
2006
2007
3,000,000
4,000,0
1,350,000
1,950,0
1,650,000
2,050,0
800,000
900
850,000
1,150,
Proof
Net income
Average
1,400,000
Understatement of ending inventory:
2006
,000)
2007
0,000
( 200,000)
2008
_
270,000
Net income FIFO
1,470,000
700,000
1,100,000
150,000
150
20
_______
____
850,000
1,150,000
Problem 7-29
Lower of
cost or NRV
Units
Inventory value
Materials:
R
100,000
S
500,000
T
900,000
Goods in process:
X
1,920,000
Y
3,100,000
Finished goods:
A
1,580,000
B
1,460,000
1,000
100
2,000
250
3,000
300
4,000
480
5,000
620
2,000
790
2,000
730
Valuation at lower of cost or NRV

9,560,000
99
Problem 7-30
(Low
er of cost or NRV)
Units
Inventory value
A
120,000
B
165,000
C
168,000
D
Unit cost
NRV
1,000
120
150
1,500
110
120
1,200
150
140
1,800
140
160
252,000
E
1,700
130
160
221,000
926,000
Problem 7-31
Product
cost or NRV
1
650
2
475
3
250
4
450
Unit cost
NRV
Lower of
700
650
475
745
255
250
450
740
Problem 7-32
Units
Lower of cost or NRV
Appliances:
A
2,700
1,250,000
B
3,600
1,080,000
Car accessories
C
840,000
D
1,600,000
Valuation at lower of cost or NRV
4,770,000
Problem 7-33
1. September 30 (40,000 x 75)
3,000,000
December 31 (10,000 x 90)
900,000
Total FIFO cost
3,900,000
NRV (50,000 x 72)
3,600,000
Loss on inventory writedown
300,000
Inventory
January 1
1,200,000
Purchases
9,400,000
Purchase discount
(
400,000)
10,200,000
Less: Inventory
December 31
3,900,000
Unit cost
NRV
500
2,500
300
3,700
600
1,400
2,000
800
2,100
2,000
Cost of goods sold before inventory writedown

6,300,000
300,000
Cost of goods sold after inventory writedown
6,600,000
2. Inventory
December 31
Income summary
00,000
3,900,000
3,9
100
Allowance for inventory writedown
300,000
300,000
Problem 7-34
a.
No adjustment is necessary because the market price is higher than the a
greed price. Any gain on purchase commitment is not recognized.
b.
No adjustment is necessary because the market price has not declined as
of December 31, 2008. The market decline is only a possible loss.
c.
Loss on purchase commitment (10,000 x 30)

Estimated liability for purchase commitment
300,000
300,000
d.
Purchases (100,000 x 150)

1,500,000
Loss on purchase commitment
Accounts payable (10,000 x 200)
2,000,000
200,000
300,000
e. Purchases
000
Accounts payable
2,000,000
Gain on purchase commitment
300,000
2,000,
300,000
Problem 7-35
12/31/2008
03/31/2009
Loss on purchase commitment

Estimated liability for PC
500,000
Purchase (100,000 x 54)

Estimated liability for PC
Accounts payable
5,500,000
Gain on purchase commitment
400,000
Problem 7-36
500,000
5,400,000
500,000
Purchase price
6,850,000
Improving and subdividing cost
3,500,000
Total cost
70,350,000
2
4
Sales price
n
Group
1
Fractio
Cost
(20 x 3,000,000)
40,200,000
2
(10 x 2,500,000)
25/105
16,750,000
3
(10 x 2,000,000)
20/105
13,400,000
60,000,000
60/105
25,000,000
20,000,000
105,000,000
70,350,000
101
Cost per lot
Unsold
Cost
Group
1
5
2
4
3
3
(40,200,000/20)
10,050,000
(16,750,000/10)
6,700,000
(13,400,000/10)
4,020,000
2,010,000
1,675,000
1,340,000
20,770,000
Problem 7-37
Inventory
Accounts payable
Net sales
Unadjusted
1,200,000
1
2
3
4
(
5
6
7
1,750,000
8,500,000
(
35,000)
50,000
50,000
20,000
26,000
40,000)
25,000
30,000
-
60,000
8
20,000
Adjusted
8,425,000
10,000
-_ __
1,911,000
1,330,000
Problem 7-38
Inventory
Net sales
Unadjusted
9,000,000
1
00)
2
3
4
5
000
Accounts payable
1,250,000
(
1,000,000
165,000)
( 165,0
20,000)
40,000)
210,000
25,000
- ___
1,300,000
25,
860,000
9,040,000
Problem 7-39
1. Biological asset
00,000
Cash
600,000
2. Biological asset
00,000
Gain from change in fair value
700,000
3. Biological asset
00,000
Gain from change in fair value
100,000
4. Loss from change in fair value

Biological asset
90,000
90,000
102
Problem 7-40
Requirement 1
1. To record the purchase of one animal aged 2.5 years on July 1.
Biological assets
Cash
108
108
2. To record the birth of one animal on July 1 with fair value of P70.
Biological assets
Cash
70
70
3. To record the change in the fair value:

Biological assets
Cash
222
222
Fair value of 10 animals on January 1 (10 x P100)
1,000
Newborn animal on July 1 at fair value
70
Acquisition cost of one animal on July 1
108
Total book value of biological assets
December 31
1,178
Fair value of 3-year old animals on December 31 (11 x P120)
1,320
Fair value of 0.5-year old animal on December 31, the newborn (1 x P80)
80
Total fair value
December 31, 2008
1,400
Book value of biological assets December 31
1,178
Increase in fair value
222
Requirement 2
Statement of financial position :
Biological assets
1,400
Income statement:
Gain from change in fair value (70 + 222)
292
Problem 7-41 Answer C
Physical count
1,500,000
Problem 7-42 Answer D
Physical count
2,500,000
Merchandise shipped FOB shipping point on December 30, 2008
from a vendor
100,000
Goods shipped FOB shipping point to a customer on January 4, 2009
400,000
Correct inventory
3,000,000
103

Markup (40% x 500,000)
200,000
Goods received on consignment
400,000
Total reduction
600,000
Problem 7-45 Answer B
Inventory shipped on consignment
600,000
Freight paid
50,000
Consigned inventory
650,000
Problem 7-46 Answer A
Reported inventory
2,000,000
Goods sold in transit, FOB destination
200,000
Goods purchased in transit, FOB shipping point
300,000
Correct amount of inventory
2,500,000
Consignment sales revenue (40 x P10,000)
400,000
Sales (900 x 1,000)
900,000
Commission (10% x 900,000)
( 90,000)
Payable to consignor
810,000
List price
900,000
Trade discounts 20% x 900,000
(180,000)
720,000
10% x 720,000
( 72,000)
Invoice price
648,000
Freight
50,000
Cost of purchase
698,000
104
List price
1,000,000
Trade discounts 20% x 1,000,000
200,000)
800,000
10% x 800,000
( 80,000)
Invoice price
720,000
Cash discount (5% x 720,000)
( 36,000)
Net amount
684,000
Freight charge
50,000
Total remittance
734,000
Purchases of IBM compatibles
00,000
Purchases of commercial software packages
00,000
Total
2,900,000
Less: Purchase return
(
50,000)
Net purchases
2,850,000
1,7
1,2
Discounts available on purchases (2% x 2,850,000)

57,000
Less: Purchase discount taken
17,000
Purchase discount lost
40,000
Accounts payable per book
2,000,000
Goods lost in transit, FOB shipping point
100,000
Purchase return
50,000)
Adjusted balance
2,050,000
Accounts payable per book
900,000
Undelivered checks
400,000
Unrecorded purchases on December 28 (150,000 x 98%)
147,000
Purchase on December 20 (200,000 x 95%)
190,000
1,637,000
Net sales per book
5,000,000
Sales return
(
50,000)
Goods shipped on December 31, 2008
300,000
Goods shipped on January 3, 2009 recorded on December 30, 2008
)
Adjusted balance
5,050,000
200,000
105
Gross sales
4,000,000
Estimated sales return (10% x 4,000,000)
(
400,000)
Net sales
3,600,000
Units
Unit cost
Total cost
January 18
15,000
345,000
28
24
240,000
Total FIFO cost
585,000
23
10,000
25,000

(4,500 x 73.50)
330,750
t
January 10
Units
Unit cos
2,000
100
Total cost
200,000
February 8
3,000
110
330,000
5,000
530,000
Weighted average unit cost (530,000/5,000)
106
Cost of inventory (3,000 x 106)
318,000
Units
ost
January 1
5
January 17
5
Balance
25,000
January 28
8
Balance
7.40
Unit c
Total cost
40,000
200,000
(35,000)
(175,000)
5,000
5
20,000
160,000
25,000
185,000

Units
Total cost
January 1
April
October 1
0
Total
200
300,000
3
525,000
300
50
1,000,000
1,000
1,825,000
Less: Sales (400 + 400)
0
Ending inventory
0
80
20
Average unit cost (1,825,000/1,000)

1,825
Cost of inventory (200 x 1,825)
365,000
106
Units
st
January
200
1
1,600,000
8
( 800,000)
8,000
200
( 4,000)
4,000
800,000
Unit co
Total cost
200
20
0
240
(3,680,000/16,000 = 230)
230
3,680,000
12,00
2,880,000
16,000
Problem 7-65
Answer B
Estimated selling price
4,050,000
Cost of disposal
( 200,000)
Net realizable value (lower than cost)
3,850,000
Estimated sales price
4,000,000
Cost to complete
(1,200,000)
Net realizable value
2,800,000
FIFO cost (lower than NRV)
2,600,000
Inventory
January 1
700,000
Purchases
3,300,000
4,000,000
Less: Inventory
December 31
600,000
Cost of goods sold before inventory writedown
400,000
100,000
Cost of goods sold after inventory writedown
500,000
3,
3,

Sales price
A
B
C
Allocated cost
(100 x 240,000)
6,000,000
(100 x 160,000)
4,000,000
(200 x 100,000)
5,000,000
24,000,000
24/60
16,000,000
16/60
20,000,000
20/60
60,000,000
15,000,000
Fraction


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CHAPTER 7

The term of the shipment is FOB destination.

The goods are held only for consignment.

There is no perfected sale yet as of December 31, 2008.

There is already a constructive delivery since the article was specif

Cost of sales recorded

4. Purchase discount lost

Accounts payable (10,000 x 98%)

Accounts payable (657,000

Purchase discount los

December 31, 2008 (units)

1. Cost of units available for sale for July

July 1 (410,000 / P4)

3. Average unit cost (1,452,100 / 302,500)

Average unit cost

December 31, 2007

3. Inventory December 31, 2008

Valuation at lower of cost or NRV

Cost of goods sold before inventory writedown

Loss on purchase commitment (10,000 x 30)

Purchases (100,000 x 150)

Loss on purchase commitment

Purchase (100,000 x 54)

4. Loss from change in fair value

3. To record the change in the fair value:

Problem 7-44 Answer D

Discounts available on purchases (2% x 2,850,000)

Problem 7-59 Answer A

Problem 7-62 Answer D

Average unit cost (1,825,000/1,000)

Problem 7-64 Answer C

Problem 7-68 Answer C

Problem 7-69 Answer B

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