Linda Page Acc 422 Week 1 Individual Assignment: The Gregg Williams Corporation

My CPA Firm has a new Client, Gregg Williams Incorporated. They make dance clothes for professional dancers. Because dance clothes go obsolete very fast they are very concerned about their inventory valuations. During our new client interview we learned the following information. On January 1, 2010, Gregg Williams Wholesalers Inc. adopted the dollar-value LIFO inventory method for income tax and external financial reporting purposes. However, Williams continued to use the FIFO inventory method for internal accounting and management purposes. In applying the LIFO method, Williams uses internal conversion price indexes and the multiple pools approach under which substantially identical inventory items are grouped into LIFO inventory pools. The following data were available for inventory pool no. 1, which comprises products A and B, for the 2 years following the adoption of LIFO. FIFO Basis per Records Units Unit Cost Total Cost Inventory, 1/1/10 Product A 10,000 $30 $300,000 Product B 9,000 25 225,000 $525,000 Inventory, 12/31/10 Product A Product B

17,000 9,000

35 26

$595,000 243,000 $829,000

Inventory, 12/31/11 Product A Product B

13,000 10,000

40 32

$520,000 320,000 $840,000

Mr. Williams wants us to prepare a schedule to compute the internal conversion price indexes for 2010 and 2011 and wants us to round indexes to two decimal places. The indexes are worth of the total grade. for each index. He also wants us to prepare a schedule to compute the inventory amounts at December 31, 2010 and 2011, using the dollar-value LIFO inventory method. The ending inventories are worth of the total grade. for each ending inventory balance. I have decided to give this job to you as you are a new graduate of the UOP accounting program. I want you to prepare the data that the client has asked for and prepare the data and schedule in conformance with the Course Policies. If you dont I will take off points. (LOTS!) (AICPA adapted)

Gregg Williams Wholesalers Inc. Internal Conversion Price Index 2010 and 2011

Inventory at current Base cost Product A Product B

2010

2011 13,000*40= $520,000 10,000* 32=$320,000 $ 840,000

10,000*30= $300,000 9,000*25= $225,000 $525,000

Inventory at Current Years cost Product A Product B 17,000*35= $595,000 9,000*26= $243,000 $838,000 13,000*35= $455,000 10,000*13= $130,000 $585,000

2010 Price Index = 838,000/525,000=1.60 2011 Price Index =840,000/585,000= 1.44

Gregg Williams Wholesalers Inc. Computation of Inventory Amounts Dollar-Value LIFO Method at December 31, 2010 and 2011

Current Inventory at Base Price Dec 31 2010 Base 2010 Layer Total $525,000
(838000-525000)=313,000

Conversion Price Index

Inventory at LIFO Price

1.00 1.60

$525,000 500.800 1,025,800

838,000

Dec 31, 2011 Base 2010 Layer(outstanding) $525,000

(840,000-585,000)=255,000 (313000-255000)=58,000

1.00 1.60

$525,000 500,800

Total

313,000

1,025,800