211)
A company made the following merchandise purchases and sales during the month of May:
May 1
Purchased
380 units at
May 5
Purchased
270 units at
May 10
Sold
400 units at
May 20
Purchased
300 units at
May 25
Sold
400 units at
There was no beginning inventory. If the company uses the weighted average periodic method, what
would be the cost of the ending inventory?
380 units × $15 each =
270 units × $17 each =
4,590
300 units × $22 each =
6,600
950 units
$16,890
800 units sold
150 units in ending inventory
Average cost = $16,890/950 units =
212)
A company made the following merchandise purchases and sales during the month of May:
May 1
Purchased
380 units at
May 5
Purchased
270 units at
May 10
Sold
400 units at
May 20
Purchased
300 units at
May 25
Sold
400 units at
There was no beginning inventory. If the company uses the LIFO periodic inventory method, what
would be the cost of the ending inventory?
380 units × $15 each =
270 units × $17 each =
300 units × $22 each =
950 units
800 units sold
150 units in ending inventory
Cost of ending inventory = 150 * $15 each =
213)
A company made the following merchandise purchases and sales during the month of May:
May 1
Purchased
380 units at
May 5
Purchased
270 units at
May 10
Sold
400 units at
May 20
Purchased
300 units at
May 25
Sold
400 units at
There was no beginning inventory. If the company uses the FIFO periodic inventory method, what
would be the cost of the ending inventory?
380 units × $15 each =
270 units × $17 each =
300 units × $22 each =
950 units
800 units sold
150 units in ending inventory
214)
A company’s store was destroyed by an earthquake on February 10 of the current year. The only
information for the current period that could be salvaged included the following:
Beginning inventory, January 1:
$44,000
Purchases to date:
$198,000
Sales to date:
$310,000
Historically, the company’s gross profit ratio has been 30%. Estimate the value of the destroyed
inventory using the gross profit method.
Goods available for sale
$242,000
COGS ($310,000 * 70%)
215)
Apply the retail method to the following company information to calculate the cost of the ending
inventory for the current period.
Cost
Retail
Beginning inventory
$20,224
$31,600
Net purchases
59,508
97,000
Sales
89,000
Beginning inventory
Net purchases
Goods available for sale
Cost ratio: $79,732/$128,600 = 62%
Sales at retail
Ending inventory at retail
Ending inventory at cost ($39,600 * 62%)
216)
A company uses the retail inventory method and has the following information available concerning
its most recent accounting period:
At Cost
At Retail
Beginning-of-period inventory
$148,600
$245,200
Net purchases
677,400
1,229,800
Sales
1,200,000
1. What is the cost-to-retail ratio using the retail method?
2. What is the estimated cost of the ending inventory?
Beginning inventory
Net purchases
Cost of goods available for sale
Cost to-retail ratio is56%.
Sales
Ending inventory at retail
217)
Forever Young Game Stores (FYG) has taken a physical count of its inventory at March 31, its fiscal
year-end. After reviewing the accounting records and documentation, the following items have been
discovered:
(a) An invoice from Shreck Co. indicates that $30,000 of games were shipped to FYG on March 27,
terms FOB shipping point. The games and invoice did not arrive at FYG until February 2 and were
not included in the physical count.
(b) An invoice from Gamers, Inc. indicates that $8,000 of games were shipped to FYG on March 29,
terms FOB destination. The games and invoice did not arrive at FYG until February 2 and were not
included in the physical count.
The physical count and cost assignment on March 31 prior to these two items is $440,000. The cost
of goods sold for FYG is $2,100,000.
1. Calculate the amount that should be reported as ending inventory for FYG.
2. Calculate the days’ sales in inventory before and after the appropriate adjustments for inventory.
218)
A company reported the current month purchase and sales data for its only product and uses the
perpetual inventory system. Determine the cost assigned to ending inventory and cost of goods sold
using FIFO.
Date
Activities
Units Acquired at Cost
Units Sold at Retail
April 1
Beginning Inventory
175 units @ $15.00
4
Purchase
150 units @ $16.00
7
Sales
160 units @ $30.00
10
Purchase
200 units @ $17.00
16
Sales
250 units @ $30.00
25
Purchase
160 units @ $18.00
28
Sales
150 units @ $32.00
Date
Activities
Units Acquired at Cost
Units Sold at Retail
April 1
Beginning Inventory
175 units @ $15.00
4
Purchase
150 units @ $16.00
7
Sales
160 units @ $30.00
219)
A company reported the current month purchase and sales data for its only product and uses the
perpetual inventory system. Determine the cost assigned to ending inventory and cost of goods sold
using LIFO.
152
7
Sales
160 units @ $30.00
10
Purchase
200 units @ $17.00
16
Sales
250 units @ $30.00
25
Purchase
160 units @ $18.00
28
Sales
150 units @ $32.00
220)
A company uses the retail inventory method and has the following information available concerning
its most recent accounting period:
At Cost
At Retail
January 1 beginning inventory
$167,340
$304,240
Cost of goods purchased
561,850
1,021,560
Sales
940,400
Sales returns
40,200
1. Use the retail inventory method to estimate the company’s year-end inventory at cost.
2. A year-end physical count at retail prices yields a total inventory of $404,800. Prepare a
calculation showing the company’s loss from shrinkage at cost and at retail.
SHORT ANSWER QUESTIONS
221)
Goods that are in transit and were shipped FOB shipping point should be included in the inventory
records of the ________.
$425,600
$234,080
222)
Goods that are in transit and were shipped FOB destination should be included in the inventory
records of the ________.
223)
Goods on consignment are goods that are shipped by the owner, called the ________, to another
party called the ________ that will sell the goods for the owner.
224)
________ is the estimated sales price of damaged goods minus the cost of making the sale.
225)
Some companies use the ________ constraint to avoid assigning incidental costs of acquiring
merchandise to inventory.
226)
The cost of an inventory item includes the ________, plus ________ costs necessary to put it in a
place and condition for sale.
227)
When purchase costs regularly rise, the ________ method of inventory valuation yields the highest
gross profit and net income.
228)
When purchase costs regularly rise, the ________ method of inventory valuation yields the lowest
gross profit and net income, providing a tax advantage.
229)
An advantage of the ________ method of inventory valuation is that it tends to smooth out the
effect of erratic changes in costs.
230)
An overstated beginning inventory will ________ cost of goods sold and ________ net income.
231)
The ________ ratio reflects how much inventory is available in terms of days’ sales.
232)
The ________ is a measure of how quickly a merchandiser sells its merchandise inventory.
233)
The ________ method of assigning costs to inventory and cost of goods sold exactly matches the
costs of particular items with the revenues they generate and would be used when items can be
easily traced to the purchase invoice cost.
234)
The ________ method of assigning costs to inventory and cost of goods sold assumes that the
inventory items are sold in the order acquired.
235)
The ________ method of assigning costs to inventory and cost of goods sold assumes that the most
recent purchases are sold first.
236)
The ________ method of assigning costs to inventory and cost of goods sold requires that we
divide the cost of goods available for sale by the units of inventory available at the time of each
sale.
237)
Regardless of what inventory method or system is used, cost of goods available for sale must be
allocated between ________ and ________.
238)
When applying the lower of cost or market method of inventory valuation, market is defined as the
________.
239)
The ________ method is commonly used to estimate the value of inventory that has been
destroyed, lost, or stolen.