Question 1

Tyler Company uses the periodic inventory system and reported the following summarized annual data at the end of 2022: $\begin{array}{lr}
\text { Sales revenue } & \$ 1,000,000 \
\text { Cost of goods sold* } & 600,000 \
\text { Gross profit } & \$ 400,000 \
\end{array}$ *Based on an ending FIFO inventory of $240,000.
The controller of the company is considering a switch from FIFO to LIFO. He has determined that on a LIFO basis, the ending inventory would have been $150,000.
Instructions
(a) Restate the summary information on a LIFO basis.
(b) What effect, if any, would the proposed change have on Tyler's sales revenue and gross profit?
(c) If you were an owner of this business, what would your reaction be to this proposed change?

Accepted Answer

The answer of Tyler Company uses the periodic inventory system...

Question 2

Instructions
1. Show computations to cost the ending inventory using the FIFO method if 600 units remain on hand at October 31.
2. Show computations to cost the ending inventory using the weighted-average cost method if 600 units remain on hand at October 31.
3. Show computations to cost the ending inventory using the LIFO method if 600 units remain on hand at October 31.

Accepted Answer

The answer of Instructions
1. Show computations to cost the ending...

Question 3

Allen's Hardware Store prepared the following analysis of cost of goods sold for the previous three years:  Net income for the years 2021, 2022, and 2023 was $75,000, $60,000, and $57,000, respectively. Since net income was consistently declining, Mr. Allen hired a new accountant to investigate the cause(s) for the declines.
The accountant determined the following:
1. Purchases of $20,000 were not recorded in 2021.
2. The 2021 December 31 inventory should have been $26,000.
3. The 2022 ending inventory included inventory costing $8,000 that was purchased FOB destination and in transit at year-end.
4. The 2023 ending inventory did not include goods costing $4,000 that were shipped on December 29 to Wilson Plumbing Company, FOB shipping point. The goods were still in transit at the end of the year.
Instructions
Determine the correct net income for each year. (Show all computations.)

Accepted Answer

The answer of Allen's Hardware Store prepared the following analysis...

Question 4

Irish Company uses the periodic inventory system and had the following inventory information available:  A physical count of inventory on December 31 revealed that there were 480 units on hand.
Instructions
1. Assume that the company uses the FIFO method. The cost of the ending inventory at December 31 is $__________.
2. Assume that the company uses the Average-Cost method. The cost of the ending inventory on December 31 is $__________.
3. Assume that the company uses the LIFO method. The cost of the ending inventory on December 31 is $__________.
4. Determine the difference in the amount of gross profit that the company would have reported if it had used the FIFO method instead of the LIFO method. Would gross profit have been greater or less?

Accepted Answer

The answer of Irish Company uses the periodic inventory system...

Question 5

Morton Watch Company reported the following income statement data for a 2-year period.  Mortan uses a periodic inventory system. The inventories at January 1, 2022, and December 31, 2023, are correct. However, the ending inventory at December 31, 2022, was overstated $5,000.
Instructions
(a) Prepare correct income statement data for the 2 years.
(b) What is the cumulative effect of the inventory error on total gross profit for the 2 years?

Accepted Answer

The answer of Morton Watch Company reported the following income...

Question 6

Lester Company sells many products. Hackenberry is one of its popular items. Below is an analysis of the inventory purchases and sales of Hackenberry for the month of March. Lester Company uses the periodic inventory system.  Instructions
(a) Using the FIFO method, calculate the amount charged to cost of goods sold for March. (Show computations)
(b) Using the weighted average method, calculate the amount assigned to the inventory on hand on March 31. (Show computations)
(c) Using the LIFO method, calculate the amount assigned to the inventory on hand on March 31. (Show computations)

Accepted Answer

The answer of Lester Company sells many products. Hackenberry is...

Question 7

The Vogelson Company accumulates the following cost and net realizable value data at December 31. $\begin{array}{lrr}\text {Inventory Categories}&\text { Cost Data}&\text {NRV }\\hline
\text { Camera } & \$ 11,000 & \$ 9,900 \
\text { Camcorders } & 7,800 & 8,500 \
\text { DVDs } & 14,000 & 12,000
\end{array}$ What is the lower-of-cost-or-NRV amount for the inventory?

Accepted Answer

The answer of The Vogelson Company accumulates the following cost...

Question 8

Mesa Company's inventory and purchases accounts show the following data for the month of September: $\begin{array}{llr}&\text { Units }&\text { Unit Cost }\
\text { Inventory, September 1 } & 100 & \$ 3.35 \
\text { Purchases: September 8 } & 450 & 3.50 \
\text { September 18 } & 350 & 3.70
\end{array}$ A physical inventory on September 30 shows 250 units on hand. Calculate the cost of ending inventory and cost of goods sold if the company uses the LIFO method and a periodic inventory system.

Accepted Answer

The answer of Mesa Company's inventory and purchases accounts show...

Question 9

Ford Co. uses a periodic inventory system. Its records show the following for the month of May, in which 75 units were sold.  Instructions
Compute the ending inventory at May 31 and cost of goods sold using the FIFO and LIFO methods. Prove the amount allocated to cost of goods sold under each method.

Accepted Answer

The answer of Ford Co. uses a periodic inventory system....

Question 10

For each of the independent events listed below, analyze the impact on the indicated items at the end of the current year by placing the appropriate code letter in the box under each item.
Code: O = item is overstated
U = item is understated
NA = item is not affected

Accepted Answer

The answer of For each of the independent events listed...

Question 11

Shellhammer Company's inventory and purchases accounts show the following data for the month of September: $\begin{array}{llr}&\text { Units }&\text { Unit Cost }\
\text { Inventory, September 1 } & 100 & \$ 3.34 \
\text { Purchases: September 8 } & 450 & 3.50 \
\text { September 18 } & 350 & 3.70
\end{array}$ A physical inventory on September 30 shows 200 units on hand. Calculate the cost of ending inventory and cost of goods sold if the company uses the FIFO method and a periodic inventory system.

Accepted Answer

The answer of Shellhammer Company's inventory and purchases accounts show...

Question 12

Liche Company reported net income of $54,000 in 2022 and $80,000 in 2023. However, ending inventory was overstated by $6,000 in 2022.
Instructions
Compute the correct net income for Liche Company for 2022 and 2023.

Accepted Answer

The answer of Liche Company reported net income of $54,000...

Question 13

Shellhammer Company's inventory and purchases accounts show the following data for the month of September: $\begin{array}{llr}&\text { Units }&\text { Unit Cost }\
\text { Inventory, September 1 } & 100 & \$ 3.34 \
\text { Purchases: September 8 } & 450 & 3.50 \
\text { September 18 } & 350 & 3.70
\end{array}$ A physical inventory on September 30 shows 200 units on hand. Calculate the value of the ending inventory and cost of goods sold if the company uses the weighted average method and a periodic inventory system. Round cost per unit to 2 decimal places and ending inventory and cost of goods sold to the nearest dollar.

Accepted Answer

The answer of Shellhammer Company's inventory and purchases accounts show...

Question 14

The following amounts are reported for Bainbridge Company:
Advertising expense
Freight-in
Cost of inventory purchased
Delivery expense
Salaries expense
Sales revenue
Which of the amounts would be included in calculating the cost of inventory?

Accepted Answer

The answer of The following amounts are reported for Bainbridge...

Question 15

The following information is available for Clancy Company: $\begin{array}{ll}
\text { Beginning inventory } & 600 \text { units at } \$ 4 \
\text { First purchase } & 900 \text { units at } \$ 6 \
\text { Second purchase } & 500 \text { units at } \$ 7.20
\end{array}$ Assume that Clancy uses a periodic inventory system and that there are 760 units left at the end of the month.
Instructions
Compute each of the following under the average-cost method:
(a) Cost of ending inventory.
(b) Cost of goods sold.

Accepted Answer

The answer of The following information is available for Clancy...

Question 16

James Supply Company reports gross profit of $120,000 in 2022. The ending inventory did not include goods valued at $9,000 that James had consigned to Eli's Gift Shop.
(1) What is the correct gross profit for 2022?
(2) What impact will this error have on the balance sheet at 12/31/22?

Accepted Answer

The answer of James Supply Company reports gross profit of...

Question 17

Galena Pharmacy reported cost of goods sold as follows:  Jim Holt, the bookkeeper, made two errors:
(1) 2022 ending inventory was overstated by $7,000.
(2) 2023 ending inventory was understated by $16,000.
Instructions
Assuming the errors had not been corrected, indicate the dollar effect that the errors had on the items appearing on the financial statements listed below. Also indicate if the amounts are overstated (O) or understated (U).

Accepted Answer

The answer of Galena Pharmacy reported cost of goods sold...

Question 18

Queen Company is in the electronics industry and the cost for inventory is decreasing.
Instructions
Indicate which inventory method will:
a. provide the highest ending inventory.
b. provide the highest cost of goods sold.
c. result in the lowest gross profit.
d. produce the most stable gross profit over several years.

Accepted Answer

The answer of Queen Company is in the electronics industry...

Question 19

The following information is available for Clancy Company: $\begin{array}{ll}
\text { Beginning inventory } & 600 \text { units at } \$ 4 \
\text { First purchase } & 900 \text { units at } \$ 6.50 \
\text { Second purchase } & 500 \text { units at } \$ 7.20
\end{array}$ Assume that Clancy uses a periodic inventory system and that there are 760 units left at the end of the month.
Instructions
Compute the cost of ending inventory under the
(a) FIFO method.
(b) LIFO method.

Accepted Answer

The answer of The following information is available for Clancy...

Question 20

Tipp Topp Company uses a periodic inventory system and reports the following for the month of June. $\begin{array}{rccr}&\text { Units }&\text { Unit Cost }&\text { Total Cost }\\hline
\text { June } 1 \text { Inventory } & 300 & \$ 5 & \$ 1,500 \
12 \text { Purchase } & 450 & 6 & 2,700 \
23 \text { Purchase } & 750 & 7.60 & 5,700 \
30 \text { Inventory } & 160 & &
\end{array}$ Instructions
(a) Compute the cost of the ending inventory and the cost of goods sold under (1) FIFO and (2) LIFO.
(b) Compute the cost of the ending inventory and the cost of goods sold using the average-cost method.

Accepted Answer

The answer of Tipp Topp Company uses a periodic inventory...

Quiz 11: Inventory

For each of the independent events listed below, analyze the impact on the indicated items at the end of the current year by placing the appropriate code letter in the box under each item. Code: O = item is overstated U = item is understated NA = item is not affected

Liche Company reported net income of $54,000 in 2022 and $80,000 in 2023. However, ending inventory was overstated by $6,000 in 2022. Instructions Compute the correct net income for Liche Company for 2022 and 2023.

The following amounts are reported for Bainbridge Company: Advertising expense Freight-in Cost of inventory purchased Delivery expense Salaries expense Sales revenue Which of the amounts would be included in calculating the cost of inventory?

James Supply Company reports gross profit of $120,000 in 2022. The ending inventory did not include goods valued at $9,000 that James had consigned to Eli's Gift Shop. (1) What is the correct gross profit for 2022? (2) What impact will this error have on the balance sheet at 12/31/22?