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137.
Inventory flow assumptions
Flat TV uses a perpetual inventory system. Shown below are Flat TV's beginning inventory
of a particular product and purchases during January:
On January 23 (prior to the purchase on January 25), Flat TV sold 13 units of this product.
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138.
Inventory flow assumptions
The perpetual inventory records of Handy Hardware show 150 units of a particular product
on hand, acquired at the following dates and costs:
On June 3, Handy sold 120 units of this product.
Instructions: Prepare a journal entry to record the cost of goods sold relating to the sale on
June 3, assuming that Handy uses: (Show your computations as per below format.)
(a) A LIFO flow assumption.
(b) A FIFO flow assumption.
(c) The average cost (or moving average) flow assumption.
139.
Inventory flow assumptions
Arrow, Inc. uses a perpetual inventory system. On January 22, 2015, the company had 200
units of a particular product on hand, with a total cost of $2,400. The per-unit costs were:
On January 24, 2015, Arrow sold 65 units of this product.
Using the three flow assumptions listed below, compute (1) the cost of goods sold, and (2)
the cost of the inventory of this product on hand after this sale. Show your computations
as per below format.
140.
Comparison of LIFO and FIFO
Both Company X and Company Y sell the same product. The cost of this product has been
rising steadily throughout the year. Both companies reported the same net income for the
year, although Company X used the first-in, first-out method of pricing inventory, while
Company Y used the last-in, first-out method.
(a) Which company's valuation of ending inventory in the balance sheet is more likely to
approximate replacement cost?
Company ______________________________
(b) Which company reports a cost of goods sold figure in the current year income
statement that is more likely to reflect the replacement cost of the units sold?
Company ______________________________
(c) Which company is minimizing income taxes it must pay?
Company ______________________________
(d) Which company would have reported the higher net income if both companies had
used the same method of pricing inventory?
Company ______________________________
141.
Inventory flow assumptions
Briefly discuss the factors management should consider in deciding:
(a) Whether to use specific identification or a cost flow assumption in measuring the cost
of goods sold.
(b) Whether to use FIFO or LIFO. (Assume a long-run trend of slowly rising prices.)
142.
Shrinkage losses
At year-end, the perpetual inventory records of James Products indicate 105 units of a
particular product in inventory, acquired at the following dates and unit costs:
A complete physical inventory taken at year-end indicates only 93 units of this product
actually are on hand.
Determine the dollar amount of the shrinkage loss assuming that James uses:
143.
Lower-of-cost-or-market
Elite Systems sells a single product. At December 31, the company's perpetual inventory
records indicate 2,500 units on hand with a total cost (FIFO basis) of $155,000. The
replacement cost of this product at this date is $35 per unit.
Prepare journal entries to record (a) the write-down of the inventory to the lower-of-cost-
or-market value at December 31, and (b) the cash sale of 100 units on January 4 at a retail
price of $50 per unit.
(a) Dec. 31
(b) Jan. 4
144.
Periodic inventory systems
Funky Fashions uses a periodic inventory system. The beginning inventory of a particular
product, and the purchases during the current year, were as follows:
At December 31, the ending inventory of this product consisted of 1,300 units.
Determine the cost of the year-end inventory and the cost of goods sold for this product
under each of the following methods of inventory valuation:
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145.
Periodic inventory systems
Tres Chic uses a periodic inventory system. The beginning inventory of a particular
product, and the purchases during the current year, were as follows:
At December 31, the ending inventory of this product consisted of 850 units.
Determine the cost of the year-end inventory and the cost of goods sold for this product
under each of the following methods of inventory valuation (Rounded):
