61
112) McMillan Company uses the periodic inventory system. It has compiled the following
information in order to prepare the financial statements at December 31, 2019:
Gross sales during 2019
$2,000,000
Sales returns and allowances during 2019
50,000
Beginning inventory, January 1, 2019
100,000
Ending inventory, December 31, 2019
120,000
Purchases during 2019
750,000
Calculate each of the following:
A. Cost of goods available for sale
B. Cost of goods sold
C. Gross profit
113) The records of Jimmy Company show 2019 purchases of $90,000. An actual count revealed
a 2019 ending inventory of $8,000. The 2019 beginning inventory was $5,000. What was cost of
goods sold for 2019?
62
114) The following income statement is complete except for a few missing titles (bold lines on
the left), and amounts (dotted lines on the right).
Prepare a complete income statement using the format and amounts provided. Fill in all items
that are missing titles and amounts (ignore income taxes).
Karl Company
Income Statement
For the Year Ended December 31, 2019
Gross sales revenue
$———-
Less: ________
$3,000
Less: Sales discounts
——–
$5,000
________
101,000
Cost of goods sold:
________
12,000
________
——–
________
77,000
Less: Ending inventory
——–
________
——–
________
38,000
Operating expenses
———
Net income
$16,000
63
115) How much were inventory purchases when cost of goods sold was $250,000, beginning
inventory was $20,000, and ending inventory was $25,000?
64
116) How much was ending inventory when sales revenue was $500,000, purchases were
$310,000, beginning inventory was $22,000, and gross profit was $200,000.
117) Compute the missing amounts that are numbered in parentheses for the income statement of
each independent case. (Hint: Each case need not be calculated in the numerical order of the
missing numbers.)
Case A
Case B
Case C
Sales revenue
$800
$800
(9)
Beginning inventory
100
(5)
90
Purchases
500
420
(10)
Total goods available for sale
(1)
(6)
(11)
Ending inventory
150
110
160
Cost of goods sold
(2)
(7)
340
Gross profit
(3)
(8)
(12)
Expenses
300
400
420
Net Income
(4)
(50)
60
65
66
118) Coulter Company uses the LIFO inventory method. The following data were available for
the month of January, 2019:
Units
Cost per Unit
Inventory, January 1
200
$5.00
Purchase No. 1
400
5.50
Purchase No. 2
700
6.00
Sale No. 1 (sold at $12.00 per unit)
500
Sale No. 2 (sold at $13.00 per unit)
500
Compute the following:
1. Beginning inventory
2. Ending inventory
3. Cost of goods available for sale
4. Cost of goods sold
5. Gross profit
67
119) William Company has provided the following data:
Units
Amount
Beginning inventory
6,000
$30,000
Purchases
32,000
192,000
Sales
28,000
280,000
A. Calculate the following using both: FIFO and LIFO inventory methods.
FIFO
LIFO
1. Ending inventory
$_______
$_______
2. Cost of Goods Sold
$_______
$_______
3. Gross profit
$_______
$_______
B. In times of rising unit costs, how does pretax income using FIFO compare to pretax income
using LIFO? Explain your answer.
Answer:
LIFO
1.
10,000 × $6
=
2.
$60,000
=
3.
$162,000
=
68
120) Jennings Company uses FIFO inventory costing. At the end of the annual accounting
period, December 31, 2019, the accounting records for the best-selling item in inventory showed
the following:
Transactions
Units
Unit
Cost
Beginning inventory, Jan. 1, 2019
500
$100
1. Purchase, Feb. 1
600
105
2. Sale, March 15 (sold at $20 each)
(700)
3. Purchase, May 15
400
110
4. Sale, July 31 (sold at $25 each)
(500)
Calculate the following:
1. Goods available for sale
2. Ending inventory
3. Cost of goods sold
Answer:
69
121) Freeman Company uses LIFO inventory costing. At the end of the annual accounting
period, December 31, 2019, the accounting records in inventory showed:
Transactions
Units
Unit
Cost
Beginning inventory, Jan. 1, 2019
300
$20
Purchase, Feb. 1
500
21
Purchase, May 15
400
22
Sale, March 15 (sold at $20 each)
(400)
Sale, July 31 (sold at $25 each)
(500)
Calculate the following:
1. Cost of goods available for sale
2. Ending inventory
3. Cost of goods sold
Answer:
70
122) A. Compute the missing amounts in the income statement under three different inventory
costing methods: (Ignore income taxes.)
FIFO
LIFO
Average
Cost
Sales revenue (3,000 units)
$90,000
$90,000
$90,000
Cost of goods sold:
Beginning inventory (1,000 units @ $10
per unit)
10,000
10,000
10,000
Purchases (4,000 units @ $12 per unit)
(1)
(7)
(13)
Goods available for sale
(2)
(8)
(14)
Ending inventory (2,000 units)
(3)
(9)
(15)
Cost of goods sold
(4)
(10)
(16)
Gross profit
(5)
(11)
(17)
Operating expenses
20,000
20,000
20,000
Net operating income (pretax)
(6)
(12)
(18)
B. Explain the results of the weighted-average inventory costing method compared to the FIFO
and LIFO costing methods during a period of increasing unit costs.
71
Answer:
72
123) Hopkins Company reported the following information related to inventory and sales:
Units
Unit Cost
Beginning inventory
1,000
$20
Purchase No. 1
7,000
22
Purchase No. 2
2,000
23
Sales–8,000 units at $35 per unit.
Compute the following amounts:
Inventory
Costing
Method
Sales
Revenue
Cost of
Goods Sold
Gross
Profit
Balance
Sheet
Inventory
Average cost
________
________
________
________
FIFO
________
________
________
________
LIFO
________
________
________
________
Inventory
Costing
Method
Sales
Revenue
Cost of
Goods Sold
Gross
Profit
Ending
Inventory
Average cost
FIFO
LIFO
73
124) The inventory records of Martin Corporation reflected the following information for the
month of August:
Date
Transaction
Number of
Units
Unit
Cost
8/1
Beginning
inventory
400
$5
8/3
Purchase No. 1
400
$5
8/5
Sale No. 1
600
8/7
Sale No. 2
100
8/11
Purchase No. 2
1,000
$7
8/17
Sale No. 3
700
8/19
Purchase No. 3
1,000
$7
8/21
Sale No. 4
600
8/28
Sale No. 5
600
8/29
Purchase No. 4
1,200
$9
8/30
Ending inventory
A. Determine the amount of the ending inventory and cost of goods sold under each of the
following methods assuming the periodic inventory system.
Method
Ending
Inventory
Cost of Goods Sold
a.
Average cost
$
$
b.
FIFO
$
$
c.
LIFO
$
$
B. Why would cash flow considerations relate to the choice of an inventory method?