Carolina Company
Income Statement
For the year ended December 31
Sales
$60,000
Cost of goods sold
23,000
Gross profit
$37,000
Expenses
13,000
189)
What advantages does a perpetual inventory system have over periodic inventory system?
190)
Patrick Randall of Sports Supplies finds that maintaining appropriate levels of inventories while
controlling costs is a major challenge. What are the challenges Patrick refers to?
191)
Carolina Company uses the LIFO method for valuing its ending inventory. The following financial
statement information is available for its first year of operation:
126
Expenses
13,000
Income before taxes
$24,000
Carolina’s ending inventory using the LIFO method was $8,700. Carolina’s accountant determined
that had the company used FIFO, the ending inventory would have been $9,100.
a. Determine what the income before taxes would have been, had Carolina used the FIFO method of
inventory valuation instead of LIFO.
b. What would be the difference in income taxes between LIFO and FIFO, assuming a 30% tax rate?
c. If Carolina wanted to lower the amount of income taxes to be paid, which method would it
choose?
192)
Evaluate each inventory error separately and determine whether it overstates or understates cost of
goods sold and net income.
Inventory error:
Cost of goods sold is:
Net income is:
Understatement of beginning inventory
Understatement of ending inventory
Overstatement of beginning inventory
Overstatement of ending inventory
Understatement of beginning inventory
Understatement of ending inventory
Overstatement of beginning inventory
Overstatement of ending inventory
193)
The Community Store reported the following amounts on their financial statements for Year 1, Year
2, and Year 3:
For the year ended
December 31
Year 1
Year 2
Year 3
Cost of goods sold
$75,000
$87,000
$77,000
Net income
22,000
25,000
21,000
Total current assets
155,000
165,000
110,000
Equity
287,000
295,000
304,000
It was discovered early in Year 4 that the ending inventory on December 31, Year 1 was overstated
by $6,000, and the ending inventory on December 31, Year 2 was understated by $2,500. The
ending inventory on December 31, Year 3 was correct. Ignoring income taxes determine the correct
amounts of cost of goods sold, net income, total current assets, and equity for each of the years
Year 1, Year 2, and Year 3.
Cost of goods sold
Net income
Total current assets
194)
A company reported the following data:
Year 1
Year 2
Cost of goods sold
$317,500
$279,100
Average inventory
72,000
93,000
Required:
1. Calculate the company’s merchandise inventory turnover for each year.
2. Comment on the company’s efficiency in managing its inventory.
195)
A company reported the following data:
Year 1
Year 2
Cost of goods sold
$425,000
$486,000
Ending inventory
140,000
175,000
Required:
1. Calculate the days’ sales in inventory for each year.
2. Comment on the trend in inventory management.
196)
A company made the following purchases during the year:
Jan. 10
15 units @ $360 each
Mar. 15
25 units @ $390 each
Apr. 25
10 units @ $420 each
July 30
20 units @ 450 each
Oct. 10
15 units @ $480 each
On December 31, there were 28 units in ending inventory. These 28 units consisted of 2 from the
January 10 purchase, 3 from the March 15 purchase, 4 from the April 25 purchase, 11 from the July
30 purchase, and 8 from the October 10 purchase. Using specific identification, calculate the cost
of the ending inventory.
2 * $360
=
3 * $390
=
4 * $420
=
11 * $450
=
8 * $480
=
197)
A company’s inventory records indicate the following data for the month of July:
July 1
Beginning
380 units at $15 each
July 5
Purchased
270 units at $17 each
July 10
Sold
400 units at $50 each
July 20
Purchased
300 units at $22 each
July 25
Sold
400 units at $50 each
If the company uses the weighted average inventory valuation method and the perpetual inventory
system, what would be the cost of its ending inventory? (Round average cost per unit to 2
decimals, and final answer to the nearest dollar.)
198)
A company’s inventory records indicate the following data for the month of April:
April 1
Beginning
350 units at $18 each
April 5
Purchase
290 units at $20 each
April 9
Sale
500 units at $55 each
April 14
Purchase
250 units at $22 each
April 20
Sale
200 units at $55 each
April 30
Purchase
240 units at $25 each
If the company uses the first-in, first-out (FIFO) method and the perpetual inventory system, what
would be the cost of the ending inventory?
199)
A company’s inventory records indicate the following data for the month of January:
Jan. 1
beginning
180 units at $9 each
Jan. 5
purchased
170 units at $10 each
Jan. 9
sold
300 units at $35 each
Jan. 14
purchased
200 units at $11 each
Jan. 20
sold
150 units at $35 each
Jan. 30
purchased
230 units at $12 each
If the company uses the last-in, first-out perpetual inventory system, what would be the cost of the
ending inventory?
200)
A company’s inventory records indicate the following data for the month of January:
Jan. 1
Beginning
180 units at $9 each
Jan. 5
Purchased
170 units at $10 each
Jan. 9
Sold
300 units at $35 each
Jan. 14
Purchased
200 units at $11 each
Jan. 20
Sold
150 units at $35 each
Jan. 30
Purchased
230 units at $12 each
If the company uses the last-in, first-out perpetual inventory system, what is the amount of cost of
goods sold for January?
201)
A company’s inventory records indicate the following data for the month of April:
April 1
Beginning
350 units at $18 each
April 5
Purchase
290 units at $20 each
April 9
Sale
500 units at $55 each
April 14
Purchase
250 units at $22 each
April 20
Sale
200 units at $55 each
April 30
Purchase
240 units at $25 each
If the company uses the first-in, first-out (FIFO) method and the perpetual inventory system, what is
the amount of cost of goods sold for April?
202)
Calculate the ending inventory using FIFO for a company that uses a perpetual inventory system,
using the information given below.
Units
Unit Cost
Beginning inventory
100
$10
Aug. 5 purchased
40
12
Aug. 10 sold
60
–
Aug. 15 purchased
70
13
Aug. 25 sold
50
–
203)
Calculate the ending inventory using LIFO for a company that uses a perpetual inventory system,
using the information given below.
Units
Unit Cost
Beginning inventory
100
$10
Aug. 5 purchased
40
12
Aug. 10 sold
60
–
Aug. 15 purchased
70
13
Aug. 25 sold
50
204)
Using the information given below for a company that uses a perpetual inventory system, calculate
the ending inventory using weighted average.
Units
Unit Cost
Beginning inventory
100
$10
Jan. 5 purchased
40
12
Jan. 10 sold
60
–
Jan. 15 purchased
70
13
Jan. 25 sold
50
–
205)
Use the information below to determine the sales revenue, cost of goods sold and gross profit that
would be reported for the company related to the March 16 sale assuming the company uses FIFO
inventory valuation and a perpetual inventory system.
January 1:
Purchased 100 units at $10 per unit.
February 5:
Purchased 60 units at $12 per unit.
March 16:
Sold 40 units for $16 per unit.
206)
Use the information below to determine the sales revenue, cost of goods sold and gross profit that
would be reported for the company related to the March 16 sale assuming the company uses LIFO
inventory valuation and a perpetual inventory system.
January 1:
Purchased 100 units at $10 per unit.
February 5:
Purchased 60 units at $12 per unit.
March 16:
Sold 40 units for $16 per unit.
207)
Use the information below to determine the sales revenue, cost of goods sold and gross profit that
would be reported for the company related to the March 16 sale assuming the company uses
weighted average inventory valuation and a perpetual inventory system.
January 1:
Purchased 100 units at $10 per unit.
February 5:
Purchased 60 units at $12 per unit.
March 16:
Sold 40 units for $16 per unit.
208)
A company reported the following data related to its ending inventory:
Product
Units Available
Cost
Market
849
100
$10
$11
842
75
16
14
847
60
14
13
860
40
16
20
Calculate the lower-of-cost-or-market on the inventory applied separately to each product.
849
842
847
860
209)
A company had the following ending inventory costs:
Product
Units of Hand
Unit Cost
Market Value
A
10
$5
$6
B
50
8
7
C
35
10
11
Required:
Calculate the lower of cost or market (LCM) value for each individual item.
210)
A company uses the periodic inventory system, and the following information is available. All
purchases and sales are on credit. The selling price for the merchandise is $11 per unit.
Units
Unit Cost
Total Cost
6/01
Inventory Balance
30
$3
$90
6/06
Purchase
70
4
280
6/11
Purchase
45
5
225
6/16
Purchase
50
6
300
Goods available
195
$895
6/12
Sale
100
6/20
Sale
60
Goods sold
160
6/31
Inventory Balance
35
Required:
Determine the cost of the ending inventory and the cost of goods sold for June using the LIFO
method.
A
B
C
TOTAL