Chapter 7 3 The Following Information Available For Wellington

Document Type
Test Prep
Book Title
Financial ACCT2 (with CengageNOWTM-- 1 term Printed Access Card) 2nd Edition
Authors
C. Wayne Alderman, Norman H. Godwin
81. Geoffry Hesse Exports
The following data are available for one of the products sold by Geoffry Hesse Exports, which uses a perpetual
inventory system.
July
1
Beginning inventory, 1,000 units at $2 each
$2,000
5
Purchased 2,000 units at $2.75 each
5,500
10
Sold 2,500 units for $16 each
15
Purchased 2,000 units at $4 each
8,000
25
Sold 1,500 units for $12 each
31
Ending inventory, 1,000 units
Refer to the information provided for Geoffry Hesse Exports. If the LIFO method of inventory costing is used, determine the following amounts:
A)
Cost of goods sold for the units sold on July 10th?
B)
Ending inventory on July 31st?
82. Geoffry Hesse Exports
The following data are available for one of the products sold by Geoffry Hesse Exports, which uses a perpetual
inventory system.
July
1
Beginning inventory, 1,000 units at $2 each
$2,000
5
Purchased 2,000 units at $2.75 each
5,500
10
Sold 2,500 units for $16 each
15
Purchased 2,000 units at $4 each
8,000
25
Sold 1,500 units for $12 each
31
Ending inventory, 1,000 units
Refer to the information provided for Geoffry Hesse Exports. If the weighted average method of inventory costing is used, determine the following
amounts:
A)
Cost of goods sold for the units sold on July 10th?
B)
Ending inventory on July 31st?
83. Prak Masters prepared the following analysis of its year-end inventory on June 30th:
Market value
Product
Quantity
per unit
A
17
$499
B
140
299
C
38
69
Determine the lower-of-cost-or-market value for each product in Prak Master's inventory and prepare the journal entry needed at year-end to value
the inventory at LCM.
84. The following information is available for Wellington Industries for its fiscal year ending January 31, 2012:
Net sales
$524,350
Cost of goods sold
350,320
Inventory, 1/31/2011
50,690
Inventory, 1/31/2012
55,440
Compute the following financial ratios for Wellington:
A)
Inventory turnover ratio
B)
Average days to sell inventory
85. The following information is available for Spin Corporation for the year ending December 31, 2012:
Cost of goods sold
$ 10,000,000
Inventory 12/31/11
$2,500,000
Gross profit
3,000,000
Inventory 12/31/12
2,000,000
Operating income
1,200,000
Total assets
7,500,000
Net income
800,000
A)
Compute the horizontal analysis for inventory 2012.
B)
Compute the vertical analysis for inventory for 2012.
C)
Compute the inventory turnover ratio for 2012.
D)
Compute the days-in-inventory ratio for 2012.
86. Richy Automotive uses the periodic inventory system. The data presented below is from the accounting
records of Richy for the year ended December 31, 2012:
Sales
$600,000
Sales discounts
3,000
Purchases
412,000
Purchase returns
4,500
Beginning inventory
30,000
Ending inventory
37,000
Operating expenses
106,000
Transportation-in
10,000
Beginning retained earnings
71,000
Calculate Richy's cost of goods sold for 2012.
87. Patt Wholesale, Inc.
On September 1, 2012, Patt Wholesale purchased 70 widgets for $35,000 cash and also paid $1,500
transportation costs related to this purchase. On the same date, Patt purchased 100 jiggies for $10,000 on credit;
however, the seller paid the $1,200 freight. The credit terms for the jiggies were 2/10, n/30. On September 3rd,
Patt determined that 5 of the widgets were defective, so they were returned to the seller. Patt paid for the jiggies
on September 9th. On September 10th, Patt purchased 90 wackets for $8,000 on credit with terms 1/10, n/30.
The seller paid the freight. Patt paid for the wackets on September 21st.
Refer to the information presented for Patt Wholesale, Inc. Prepare all of Patt's journal entries for September.
Patt uses a periodic inventory system.
88. Addison Knitwear
The following data are available for one item of merchandise sold by Addison Knitwear, which uses a periodic
inventory system.
February
1
On hand, 100 units at $12 each
8
Purchased, 30 units at $13 each
25
Sold, 84 units for $30 each
Refer to the information provided for Addison Knitwear. If Addison uses the FIFO method, determine the following amounts:
A)
Ending inventory on February 28th?
B)
Cost of goods sold for the month of February?
89. Addison Knitwear
The following data are available for one item of merchandise sold by Addison Knitwear, which uses a periodic
inventory system.
February
1
On hand, 100 units at $12 each
8
Purchased, 30 units at $13 each
25
Sold, 84 units for $30 each
Refer to the information provided for Addison Knitwear. If the LIFO method is used, determine the following amounts:
A)
Ending inventory on February 28th?
B)
Cost of goods sold for the month of February?
90. Addison Knitwear
The following data are available for one item of merchandise sold by Addison Knitwear, which uses a periodic
inventory system.
February
1
On hand, 100 units at $12 each
8
Purchased, 30 units at $13 each
25
Sold, 84 units for $30 each
Refer to the information provided for Addison Knitwear. If the weighted average method is used, determine the following amounts:
A)
Ending inventory on February 28th?
B)
Cost of goods sold for the month of February?
91. Pendary Place Cafe reported the following financial results for 2011 and 2012:
2012
2011
Beginning inventory
35,000
C
Net purchases
A
330,000
Cost of goods available for sale
260,000
380,000
Ending inventory
40,000
30,000
Cost of goods sold
B
D
Provide the answer for each missing letter above.
92. Kellson, Inc.
Selected data from the financial statements for Kellson, Inc. are presented below.
Net sales
$210,000
Cost of goods sold
139,000
Selling, general, & administrative expenses
63,000
Other operating expenses
600
Income tax expense
3,000
Beginning inventory
10,000
Ending inventory
16,000
Ending retained earnings
35,000
Determine the dollar amount of net purchases, then use this figure for the net purchases within the cost of goods sold model to show the computation
for cost of goods sold.
93. The cost of goods sold for Annah, Inc. totaled $1,305,000. Sales returns and purchase returns were $3,000
and $4,000, respectively. Purchases totaled $1,300,000. Purchase discounts totaled $7,000, while sales
discounts totaled $5,000. Beginning inventory was $90,000. Determine the amount of ending inventory to be
reported on Annah's balance sheet.
94. Denton Hardware had beginning inventory of $44,000 on January 1, 2012. During 2012, Denton purchased
$610,000 of goods from a supplier. On December 31, 2012, the cost of unsold inventory was $50,000. Compute
Denton's cost of goods available for sale and cost of goods sold for 2012.
95. Davees Inc. reported the following information for 2012 and 2011:
2012
2011
Sales
$945,000
$890,000
Sales discounts
10,500
23,000
Purchases
602,000
600,000
Ending inventory
50,000
45,000
Transportation-in
17,000
19,000
Purchase discounts
4,000
5,000
Determine the following amounts for Davees for 2012:
A)
Net cost of inventory purchases
B)
Cost of goods available for sale
C)
Cost of goods sold
D)
Inventory turnover ratio
E)
Average days to sell inventory
96. Under the ____________________ inventory system, the inventory account is updated after each purchase
or sale.
97. Cost of goods sold is equal to the beginning inventory plus the cost of net purchases minus
____________________.
98. The ____________________ method calculates cost of goods sold based on the assumption that the first
unit of inventory purchased is the first unit sold.
99. The ____________________ method calculates cost of goods sold based on the assumption that the last unit
of inventory purchased is the first unit sold.
100. The difference between the inventory reported on the balance sheet by LIFO basis and what inventory
would be if reported on a FIFO basis is called a(n) ____________________.
101. The understatement of ending inventories in one period leads to a(n) ____________________ of cost of
goods sold in the same period.
102. An overstatement error in the inventory account in the current period will result in an understatement of
____________________ in the next period.
103. A departure from the cost basis of accounting may be necessary when the ____________________ of the
inventory is less than its cost to the company.
104. The ratio of a company's cost of goods sold to its average inventory is called its ____________________.
105. A company can calculate its days-in-inventory ratio by dividing the 365 days per year by its
____________________.

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