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Exercises

The document provides inventory data for a company over the month of June including purchases and sales on various dates. It also lists 4 multiple choice questions related to calculating ending inventory under LIFO, FIFO, and average cost assumptions. Additional sample problems are provided relating to inventory cost flow assumptions, average inventory cost calculations, and inventory ratios.

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Leslie Beltran Chiang
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© © All Rights Reserved
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Download as DOCX, PDF, TXT or read online on Scribd
191 views

Exercises

The document provides inventory data for a company over the month of June including purchases and sales on various dates. It also lists 4 multiple choice questions related to calculating ending inventory under LIFO, FIFO, and average cost assumptions. Additional sample problems are provided relating to inventory cost flow assumptions, average inventory cost calculations, and inventory ratios.

Uploaded by

Leslie Beltran Chiang
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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HOMEWORK#2

Use the following information for questions 77 through 80.


Transactions for the month of June were:
Purchases Sales
June 1 (balance) 800 @ $3.20 June 2 600 @ $5.50
3 2,200 @ 3.10 6 1,600 @ 5.50
7 1,200 @ 3.30 9 1,000 @ 5.50
15 1,800 @ 3.40 10 400 @ 6.00
22 500 @ 3.50 18 1,400 @ 6.00
25 200 @ 6.00

1. Assuming that perpetual inventory records are kept in units only, the ending inventory on
a LIFO basis is
a. $4,110.
b. $4,160.
c. $4,290.
d. $4,470.

2. Assuming that perpetual inventory records are kept in dollars, the ending inventory on a
LIFO basis is
a. $4,110.
b. $4,160.
c. $4,290.
d. $4,470.

3. Assuming that perpetual inventory records are kept in dollars, the ending inventory on a
FIFO basis is
a. $4,110.
b. $4,160.
c. $4,290.
d. $4,470.

4. Assuming that perpetual inventory records are kept in units only, the ending inventory on
an average-cost basis, rounded to the nearest dollar, is
a. $4,096.
b. $4,238.
c. $4,290.
d. $4,322.

Problem 11

Kiner Co. has the following data related to an item of inventory:


Inventory, March 1 100 units @ $4.20
Purchase, March 7 350 units @ $4.40
Purchase, March 16 70 units @ $4.50
Inventory, March 31 130 units

1. The value assigned to ending inventory if Kiner uses LIFO is


a. $579.
b. $552.

Finals_Inventories_exercises 2 Page 1
c. $546.
d. $585.

2. The value assigned to cost of goods sold if Kiner uses FIFO is


a. $579.
b. $552.
c. $1,723.
d. $1,696.

Problem 12

3. Dark Co. recorded the following data pertaining to raw material X during January 2007:
Units
Date Received Cost Issued On Hand
1/1/07 Inventory $8.00 3,200
1/11/07 Issue 1,600 1,600
1/22/07 Purchase 4,000 $9.40 5,600
The moving-average unit cost of X inventory at January 31, 2007 is
a. $8.70.
b. $8.85.
c. $9.00.
d. $9.40.

Problem 13

4. Teel Distribution Co. has determined its December 31, 2007 inventory on a FIFO basis at
$250,000. Information pertaining to that inventory follows:
Estimated selling price $255,000
Estimated cost of disposal 10,000
Normal profit margin 30,000
Current replacement cost 225,000
Teel records losses that result from applying the lower-of-cost-or-market rule. At
December 31, 2007, the loss that Teel should recognize is
a. $0.
b. $5,000.
c. $20,000.
d. $25,000.

Problem 14

The following data concerning the retail inventory method are taken from the financial records of
Stone Company.
Cost Retail
Beginning inventory $ 49,000 $ 70,000
Purchases 224,000 320,000
Freight-in 6,000 —
Net markups — 20,000
Net markdowns — 14,000
Sales — 336,000

Finals_Inventories_exercises 2 Page 2
5. The ending inventory at retail should be
a. $74,000.
b. $60,000.
c. $64,000.
d. $42,000.

6. If the ending inventory is to be valued at approximately the lower of cost or market, the
calculation of the cost to retail ratio should be based on goods available for sale at (1)
cost and (2) retail, respectively of
a. $279,000 and $410,000.
b. $279,000 and $396,000.
c. $279,000 and $390,000.
d. $273,000 and $390,000.

7. Assuming no change in the price level if the LIFO inventory method were used in conjunction
with the data, the ending inventory at cost would be
a. $42,600.
b. $42,000.
c. $40,800.
d. $43,200.

Problem 15

8. Dye Corporation’s computation of cost of goods sold is:


Beginning inventory $ 60,000
Add: Cost of goods purchased 405,000
Cost of goods available for sale 465,000
Ending inventory 90,000
Cost of goods sold $375,000
The average days to sell inventory for Dye are
a. 58.4 days.
b. 67.6 days.
c. 73.0 days.
d. 87.6 days.

9. The 2007 financial statements of Wert Company reported a beginning inventory of $80,000,
an ending inventory of $120,000, and cost of goods sold of $600,000 for the year. Wert’s
inventory turnover ratio for 2007 is
a. 7.5 times.
b. 6.0 times.
c. 5.0 times.
d. 4.3 times.

Finals_Inventories_exercises 2 Page 3

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