Question 1

$$\begin{array}{l}
\begin{array} { l } 
\text {  }&\text { }\
&\text { FIFO }\
\text { Sales revenue }(4,000 \text { units) } & \$ 80,000 \
\text { Cost of goods sold: } & \
\text { Beginning inventory }(1,000 &\
\text { units } @\$ 10 \text { per unit) } & 10,000   \
\text { Purchases ( } 5,000 \text { units } @ \$ 12 & \
\text { per unit) } & 60,000\
\text { Goods available for sale } & \
\text { Ending inventory ( } 2,000 \text { units) } & \
\quad \text { Cost of goods sold } & \
\text { Gross margin } &  \
\text { Expenses } &20,000 \
\text { Net income (pretax) }
\end{array}
\begin{array} { l } 
\text {  }&\text {Weighted }\
\text { LIFO }&\text {Average }\
\$ 80,000 & \$ 80,000 \
&&\
\
10,000 & 10,000 \
\
60,000 & 60,000 \
\
\
\
\
20,000 & 20,000\
\
\end{array}
\end{array}$$
 B.Explain the results of the weighted-average inventory costing method compared to the FIFO and LIFO costing methods.

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\[\begin{array}{l}
\begin{array} { l } 
\text { ...

Question 2

Given a particular set of facts and assumptions,the following pairs of amounts were computed using FIFO and LIFO.For each pair of amounts,indicate which amount resulted from applying FIFO,and which amount resulted from applying LIFO. A. Prices are increasing, ending inventory
is:
1. $\$ 20,650$
2. $\$ 19,400$
B. Prices are increasing, cost of goods sold is:
1. $\$ 10,650$
2. $\$ 9,400$
C. Prices are decreasing, ending inventory is:
1. $\$ 5,500$
2. $\$ 5,000$
D. Prices are decreasing, cost of goods sold is:
1. $\$ 6,200$
2. $\$ 7,000$

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Question 3

Rio Company uses the FIFO inventory costing method and has a perpetual inventory system.All purchases and sales were cash transactions.The records reflected the following for January,2010:
 $\begin{array} { l c c } & \text { Units } & \text { Unit Cost } \ \text { Beginning inventory } & 100 & \$ 1.00 \ \text { Purchase, January 6 } & 200 & 1.20 \ \text { Sale, January 10 (at \$2.40 per unit) } & 110 & \ \text { Purchase, January 14 } & 100 & 1.30 \ \text { Sale, January 29 (at } \$ 2.60 \text { per unit) } & 170 & \end{array}$
Determine the following:
A. 2010 cost of goods available for sale
B. 2010 ending inventory
C. 2010 cost of goods sold
D. The journal entries for January 6 and 10 .

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Question 4

Jennings Company uses the periodic inventory system and applied FIFO inventory costing.At the end of the annual accounting period,December 31,2010,the accounting records for the best selling item in inventory showed:
 $$\begin{array} { l c c } 
 \text { Transactions }  & \text { Units } & \text { Unit Cost } \

\text { Beginning inventory, Jan. 1, } 2010 & 500 & \$ 100 \
\text { 1. Purchase, Feb. } 1 & 600 & 105 \
\text { 2. Sale, March } 15 \text { (sold at } \$ 20 \text { each) } & (700) & \
\text { 3. Purchase, May } 15 & 400 & 110 \
\text { 4. Sale, July } 31 \text { (sold at } \$ 25 \text { each) } & (500) &
\end{array}$$ Calculate the following:
 (round to the nearest dollar.)
1.Goods available for sale
2.Ending inventory
3.Cost of goods sold

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Question 5

Cutting Edge Technologies reported the following information in their 2010 annual report:
 $\begin{array}{lr}
& \text {In millions}\
\text { Net sales revenue } & \$ 18,860 \
\text { Cost of sales } & 11,010 \
\text { December } 31,2010 \text { inventory } & 1,840 \
\text { December } 31,2011 \text { inventory } & 1,550
\end{array}$ 1.Determine the inventory turnover ratio.
2.Determine the average days to sell inventory.
3.Explain the meaning of each number.

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Question 6

The inventory records of Martin Corporation reflected the following information for the month of August:
 $$\begin{array} { l l c c } 
\text { Date } & { \text { Transaction } } & \text { Number of Units } & \text { Unit Cost } \
8 / 1 & \text { Beginning inventory } & 400 & \$ 5 \
8 / 3 & \text { Purchase No. 1 } & 400 & \$ 5 \
8 / 5 & \text { Sale No. 1 } & 600 & \
8 / 7 & \text { Sale No. 2 } & 100 &  \
8 / 11 & \text { Purchase No. 2 } & 1,000 & \$ 7 \
8 / 17 & \text { Sale No. 3 } & 700 & \
8 / 19 & \text { Purchase No. 3 } & 1,000 &\$ 7 \
8 / 21 & \text { Sale No. 4 } & 600 &  \
8 / 28 & \text { Sale No. } 5 & 600 & \
8 / 29 & \text { Purchase No. 4 } & 1,200& \$9 \
8 / 30 & \text { Ending inventory } & & 
\end{array}$$ A.Determine the amount of the ending inventory and cost of goods sold under each of the following methods assuming the periodic inventory system. $$\begin{array} { lcccl } 
 \text { Method} & \text {  Ending } & \text {  Cost of Goods Sold } \
 & \text {  Inventory} & \
\text { a. Weighted-average} & \$ & \$ \
\text {b. FIFO } & \$& \$ \
\text {c. LIFO } & \$ & \$
\end{array}$$ B.Why would cash flow considerations relate to the choice of an inventory method?

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Question 7

Quest Inc.provided the following footnote in their annual report:
Inventories are stated at the lower of cost or market.The cost of inventories has been determined using last in first out (LIFO)method.Cost of goods sold under LIFO costing were $22.2 billion for 2011 and ending inventory under LIFO was $1.3 billion.Inventory in 2010 under LIFO costing was $1.2 billion.The LIFO Reserve account carried a credit balance of $0.8 billion in 2011 and $0.6 billion in 2010.
Compute the following:
 1. FIFO ending inventory balance at year end 2010 $ \quad $ -------
2. FIFO ending inventory balance at year end 2011 $ \quad $  -------
3. FIFO cost of goods sold for year end 2011 $ \quad $  $ \quad $ $ \quad $-------
4. Inventory turnover under LIFO costing for 2011 $ \quad $ -------
5. Inventory turnover under FIFO costing for 2011 $ \quad $ -------

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Question 8

The following income statement is complete except for a few captions with bold lines on the left,and amounts with dotted lines on the right.You are to fill in the most likely captions and amounts (ignore income taxes):

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Question 9

Compute the missing amounts for the income statement for each independent case. $$\begin{array} { l r c r } 
& \text { Case A } & \text { Case B } & \text { Case C } \
\text { Sales revenue } & \$ 800 & \$ 800 & \
\text { Beginning inventory } & 100 & & \$ 90 \
\text { Purchases } & 500 & 420 & \
\text { Total goods available } & & & \
\text { for sale } & & & \
\text { Ending inventory } & 150 & 110 & 160 \
\text { Cost of goods sold } & & & 340 \
\text { Gross margin } & & & \
\text { Expenses } & 300 & 400 & 420 \
\text { Net Income } & & ( 50 ) & 60
\end{array}$$

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Question 10

The records of Atlantis Company reflected the following for the month of February:
 $\begin{array}{llcc}
\text { Date } & {\text { Transaction }} & \text { Number of Units } & \text { Unit Cost } \
2 / 1 & \text { Beginning inventory } & 600 & \$ 3 \
2 / 2 & \text { Purchase No.1 } & 500 & \$ 4 \
2 / 5 & \text { Sale No. 1 } & 700 &  \
2 / 12 & \text { Purchase No. } 2 & 600 & \$ 5\
2 / 15 & \text { Sale No. 2 } & 700 & \
2 / 23 & \text { Purchase No. } 3 & 900  &\$ 6\
2 / 28 & \text { Ending inventory} & ?  &\
\end{array}$
Determine the amount of ending inventory and cost of goods sold using the following methods:
$\begin{array} { l c c c } & \text { Method } & \text { Inventory } & \text { Cost of Goods Sold } \ \text { A. } & \text { LIFO } & \$ & \$ \ \text { B. FIFO } & \text { F } & \$ & \$ 
\end{array}$

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Question 11

The records of Jimmy Company show 2010 purchases of $90,000.An actual count revealed a 2010 ending inventory of $8,000.The 2010 beginning inventory was $5,000.What was cost of goods sold for 2010?

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Question 12

How much was ending inventory when sales revenue was $500,000,purchases were $310,000,beginning inventory was $22,000,and gross margin was $200,000?

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Question 13

Boulder,Inc.is computing its inventory at December 31,2010.The following information relates to the five major inventory items regularly stocked for resale $$\begin{array}{l}
\begin{array} { cc} 
\
\
\text { Item}& \text { Item Ouantity on Hand }\
\mathrm{A} & 100 \
\mathrm{~B} & 150 \
\mathrm{C} & 25 \
\mathrm{D} & 300 \
\mathrm{E} & 700
\end{array}
\begin{array} { cc } 
\text { December 31,2009 } & \text { Replacement Cost } \
\text { Unit Cost when } & \text { (Market) at December 31. } \
\text { Acquired (FIFO) } & 2009\
\$ 40 & \$ 35\
\$ 50 & \$ 52 \
\$ 100 & \$ 80 \
\$ 60 & \$ 62 \
\$ 15 & \$ 12
\end{array}
\end{array}$$

Using the lower-of-cost-or-market rule,compute the total valuation for each inventory item at December 31,2010,and the total inventory valuation.

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Question 14

Coulter Company uses the LIFO inventory method under the periodic inventory system.The following data were available for the month of January,2010:
 $$\begin{array} { l c r } 
& \text { Units } & \text { Cost per Unit } \
\text { Inventory, January 1 } & 200 & \$ 5.00 \
\text { Purchase No. 1 } & 400 & 5.50 \
\text { Sale No. 1 (sold at } \$ 12.00 \text { per unit) } & 500 & \
\text { Purchase No. } 2 & 700 & 6.00 \
\text { Sale No. } 2 \text { (sold at } \$ 13.00 \text { per unit) } & 500 &
\end{array}$$ Compute the following:
1.Beginning inventory
2.Ending inventory
3.Cost of goods available for sale
4.Cost of goods sold
5.Gross margin

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Question 15

How much were inventory purchases when cost of goods sold was $250,000,beginning inventory was $20,000,and ending inventory was $25,000?

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Question 16

The single-step income statement for Clinton Company for 2010 reported the following under two different assumptions $\begin{array}{lr} 
& \text { Case A FIFO } & \text { Case B LIFO } \
\text { Sales revenue } & \underline{(\$ 1,000,000)}&\underline{(\$ 1,000,000)}\
\text { Expenses: } & & \
\text { Cost of goods sold } &   600,000& 700,000  \
\text { Salary and wage expense } &  100,000&100,000 \
\text { Depreciation } &  20,000&20,000 \
\text { Other expenses } &80,000&80,000 \
\text { Total expenses } & 800,000 &900,000\
\text { Pretax income } & \$ 200,000 & \$ 100,000\
\
\text { Ending inventory for } 2010& \$ 120,000 & \$ ?

\end{array}$ Answer the following questions (assume a 40% income tax rate):
A.Were merchandise inventory costs rising,or falling? Explain your answer.
B.What was the amount of the LIFO ending inventory?
C.Calculate net income (after tax)for both LIFO and FIFO.
D.Under FIFO,would retained earnings on the balance sheet be higher or lower than under LIFO?

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Question 17

Hopkins Company reported the following information related to inventory and sales:
 $$\begin{array} { l r r } 
& \text { Units } & \text {  Unit Cost } \
\text { Beginning inventory } & 6,000 & \$ 30,000 \
\text { Purchase No.1 } & 32,000 & 192,000 \
\text {Purchase No.2 } & 28,000 & 280,000
\end{array}$$ Sales-8,000 units at $35 per unit.
Compute the following amounts assuming a periodic inventory system: $\begin{array}{lcccccl}
\text { Inventory Costing } & & \text { Cost of Goods } & \text { Gross } & \text { Balance Sheet } \
\text { Method } & \text { Revenue } & \text { Sold } & \text { Margin } & \text { Inventory }\
\text { FIFO }\
\text { LIFO}\
\end{array}$

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Question 18

William Company uses the periodic inventory system and has provided the following data:
 $$\begin{array} { l r r } 
& \text { Units } & \text { Amount } \
\text { Beginning inventory } & 6,000 & \$ 30,000 \
\text { Purchases } & 32,000 & 192,000 \
\text { Sales } & 28,000 & 280,000
\end{array}$$ Requirement 1:
Calculate the following using both FIFO and LIFO inventory methods. $\begin{array}{ll}
 & \$ \text { FIFO } & \$ \text { LIFO } \
\text { A. Ending inventory }& \$----& \$----\
\text { B. Cost of Goods Sold }& \$----& \$----\
\text { C. Gross margin }& \$----& \$----\
\end{array}$ Requirement 2:
Conceptually,how does pretax income using FIFO (in times of rising prices)compare to LIFO pretax income? Explain your answer.

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Question 19

McMillan Company uses the periodic inventory system.It has compiled the following information in order to prepare the financial statements at December 31,2010:
 $$\begin{array} { l r } 
\text { Gross sales during 2010 } & \$ 2,000,000 \
\text { Sales returns and allowances during } 2010 & 50,000 \
\text { Beginning inventory, January 1, 2010 } & 100,000 \
\text { Ending inventory, December } 31,2010 & 120,000 \
\text { Purchases during 2010 } & 750,000
\end{array}$$ Calculate each of the following:
 Cost of goods available for sale,cost of goods sold and gross margin.

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Question 20

Freeman Company uses the periodic inventory system and applied LIFO inventory costing.At the end of the annual accounting period,December 31,2009,the accounting records in inventory showed $$\begin{array} { l c c } 
\underline { \text { Transactions } } & \underline { \text { Units } } & \underline { \text { Unit Cost } } \
\hline \text { Beginning inventory, Jan. 1, 2009 } & 300 & \$ 20 \
\text { Purchase, Feb. 1 } & 500 & 21 \
\text { Sale, March } 15 \text { (sold at \$20 each) } & ( 400 ) & \
\text { Purchase, May 15 } & 400 & 22 \
\text { Sale, July } 31 \text { (sold at \$25 each) } & ( 500 ) &
\end{array}$$ Calculate the following:
 (round to the nearest dollar.)
1.Cost of goods available for sale
2.Ending inventory
3.Cost of goods sold

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Quiz 7: Reporting and Interpreting Cost of Goods Sold and Inventory

The following income statement is complete except for a few captions with bold lines on the left,and amounts with dotted lines on the right.You are to fill in the most likely captions and amounts (ignore income taxes):

The records of Jimmy Company show 2010 purchases of $90,000.An actual count revealed a 2010 ending inventory of $8,000.The 2010 beginning inventory was $5,000.What was cost of goods sold for 2010?

How much was ending inventory when sales revenue was $500,000,purchases were $310,000,beginning inventory was $22,000,and gross margin was $200,000?

How much were inventory purchases when cost of goods sold was $250,000,beginning inventory was $20,000,and ending inventory was $25,000?