ACC 304-Maddox Specialty Company, a division of Lost World Inc
Subject: Business   / Accounting
Question
Problem 9-9
Save your time!
- Proper editing and formatting
- Free revision, title page, and bibliography
- Flexible prices and money-back guarantee
Maddox Specialty Company, a division of Lost World Inc., manufactures three models of gear shift components for bicycles that are sold to bicycle manufacturers, retailers, and catalog outlets. Since beginning operations in 1990, Maddox has used normal absorption costing and has assumed a first-in, first-out cost flow in its perpetual inventory system. The balances of the inventory accounts at the end of Maddox’s fiscal year, November 30, 2014, are shown below. The inventories are stated at cost before any year-end adjustments.
Finished goods
$672,880
Work in process
126,200
Raw materials
274,400
Factory supplies
70,300
The following information relates to Maddox’s inventory and operations.
1. The finished goods inventory consists of the items analyzed below.
Cost
Market
Down tube shifter
Standard model
$ 69,100
$ 68,300
Click adjustment model
95,420
88,580
Deluxe model
112,800
110,100
Total down tube shifters
277,320
266,980
Bar end shifter
Standard model
83,190
93,640
Click adjustment model
108,700
107,100
Total bar end shifters
191,890
200,740
Head tube shifter
Standard model
79,070
78,600
Click adjustment model
124,600
126,500
Total head tube shifters
203,670
205,100
Total finished goods
$672,880
$672,820
2.
One-half of the head tube shifter finished goods inventory is held by catalog outlets on consignment.
3.
Three-quarters of the bar end shifter finished goods inventory has been pledged as collateral for a bank loan.
4.
One-half of the raw materials balance represents derailleurs acquired at a contracted price 20% above the current market price. The market value of the rest of the raw materials is $135,100.
5.
The total market value of the work in process inventory is $116,170.
6.
Included in the cost of factory supplies are obsolete items with an historical cost of $4,790. The market value of the remaining factory supplies is $66,900.
7.
Maddox applies the lower-of-cost-or-market method to each of the three types of shifters in finished goods inventory. For each of the other three inventory accounts, Maddox applies the lower-of-cost-or-market method to the total of each inventory account.
8.
Consider all amounts presented above to be material in relation to Maddox’s financial statements taken as a whole.
(a)
Prepare the inventory section of Maddox’s balance sheet as of November 30, 2015. (Round answers to 0 decimal places, e.g. 2,550.)
Maddox Specialty Company
Balance Sheet
November 30, 2015
Current Assets Current Liabilities Intangible Assets Long-term Investments Long-term Liabilities Property, Plant and Equipment Stockholders’ Equity Total Assets Total Current Assets Total Current Liabilities Total Intangible Assets Total Liabilities Total Liabilities and Stockholders’ Equity Total Long-term Investments Total Long-term Liabilities Total Property, Plant and Equipment Total Stockholders’ Equity
Work-in-Process Finished Goods Total Inventories Factory Supplies Raw Materials Inventory
Inventory Raw Materials Total Inventories Work-in-Process Factory Supplies Finished Goods
$
Factory Supplies Raw Materials Total Inventories Finished Goods Work-in-Process Inventory
Inventory Total Inventories Factory Supplies Finished Goods Raw Materials Work-in-Process
Work-in-Process Factory Supplies Inventory Finished Goods Raw Materials Total Inventories
Finished Goods Total Inventories Factory Supplies Inventory Work-in-Process Raw Materials
