Chapter 7: Inventories
144.
The units of an item available for sale during the year were as follows:
January 11
Inventory
60 units @ $145
February 27
Purchase
90 units @ $150
November 21
Purchase
75 units @ $154
There are 48 units of the item in the physical inventory at December 31. The periodic inventory system is used.
Determine the inventory cost by (a) the first-in, first-out method, (b) the last-in, first-out method, and (c) the
average cost method. Show your work.
145. The units of Manganese Plus available for sale during the year were as follows:
Mar. 1
Inventory
@ $30
$ 480
June 16
Purchase
@ $35
1,050
Nov. 28
Purchase
@ $39
1,755
$3,285
There are 15 units of the product in the physical inventory at November 30. The periodic inventory system
is
used. Determine the inventory cost by (a) FIFO, (b) LIFO, and (c) average cost methods.
Chapter 7: Inventories
146. Complete the chart, indicating whether LIFO or FIFO would give the highest and lowest amounts for each item,
assuming a period of increasing costs.
Highest Amount
Lowest Amount
Cost of merchandise sold
Gross profit
Net income
Ending merchandise inventory
147. The units of Manganese Plus available for sale during the year were as follows
Mar.
1
Inventory
@ $30
$ 480
June
16
Purchase
@ $35
1,050
Nov.
28
Purchase
@ $39
1,755
$3,285
There are 15 units of the product in the physical inventory at November 30. The periodic inventory system
is
used. Determine the difference in gross profit between the LIFO and FIFO inventory cost systems.
Chapter 7: Inventories
148.
Applying the lower of cost or market to each item of inventory, what should the total inventory value be for
the
following items?
Item
Inventory
Quantity
Cost per
Unit
Market value
per Unit
Total
Cost
Total
Market
A
300
$15.00
$14.50
$4,500
$4,350
B
200
$14.00
$15.00
$2,800
$3,000
C
100
$17.00
$17.50
$1,700
$1,750
149.
Determine the total value of the merchandise using net realizable value.
Item
Quantity
Selling Price
Commission
Doll
10
$7
$2
Horse
5
9
3
Chapter 7: Inventories
150.
During the taking of its physical inventory on December 31, Almond Supplies Company incorrectly counted
its
inventory as $545,000 instead of the correct amount of $554,000. Indicate the effects of the misstatement
on
Almond Supplies Company’s balance sheet and income statement for the year ended December 31.
151.
While taking a physical inventory, a company counts its inventory as less than the actual amount on hand. How
will
this error affect the income statement?
Chapter 7: Inventories
152.
On the basis of the following data, determine the value of the inventory at the lower of cost or market. Apply
lower
of cost or market to each inventory item. Show your work.
Item
Inventory Quantity
Unit Cost Price
Unit Market Price
Product C
300
$ 6
$ 5
Product D
420
12
14
Chapter 7: Inventories
153.
On the basis of the following data, determine the value of the inventory at the lower of cost or market. Apply
lower
of cost or market to each inventory item. Show your work.
Item
Inventory Quantity
Unit Cost Price
Unit Market Price
Gear X
175
$33
$29
Gear Y
225
27
28
Chapter 7: Inventories
154.
The following data were taken from the annual reports of Big Bang Inc., a manufacturer of fireworks, and
Orange
Inc., a manufacturer of computers.
Big Bang, Inc.
Orange, Inc.
Cost of merchandise sold
$830,000
$11,540,000
Inventory, end of year
190,000
320,000
Inventory, beginning of year
240,000
290,000
(a)
Determine the (1) inventory turnover and (2) number of days’ sales in inventory for Big Bang and
Orange.
Round your answers to two decimal places.
(b)
How would you expect these measures to compare between the companies? Why?
Chapter 7: Inventories
155.
Based on the following data, calculate the estimated cost of the merchandise inventory on March 31 using the
retail
method.
Cost
Retail
March 1
Merchandise inventory
$225,000
$357,600
March 1–31
Purchases (net)
454,245
612,750
March 1–31
Sales
835,000
March 1
Merchandise inventory
March 1–31
Purchases (net)
Merchandise available for sale
$970,350
$679,245/$970,350 = 70%
March 1–31
Sales
Merchandise inventory (at retail)
156.
A business using the retail method of inventory costing determines that merchandise inventory at retail is
$2,300,000. If the ratio of cost to retail price is 55%, what is the amount of inventory to be reported on the
financial
statements?
Chapter 7: Inventories
157.
Based upon the following data, estimate the cost of ending merchandise inventory using the gross profit method.
Sales $250,000
Estimated gross profit rate 25%
Beginning merchandise inventory $ 9,000
Purchases (net) 211,000
Merchandise available for sale $220,000
Chapter 7: Inventories
158.
Fill in the missing amounts from the chart below regarding the calculation of Bean Corporation’s estimated inventory
using the retail method of estimation.
Cost
Retail
Merchandise inventory, October 1
$13,687
$19,553
Purchases for October (net)
?
98,344
Merchandise available for sale
$82,528
$ ?
Ratio of cost to retail price: ?
Sales for October
?
Merchandise at retail, October 31
$25,340
Merchandise at cost, October 31
$ ?
Retail
Purchases for October (net)
Merchandise available for sale
Sales for October
Merchandise at retail, October 31
($25,340 × 70%)
Chapter 7: Inventories
159.
List the internal control objectives illustrated by the following:
(a)
keeping the inventory storeroom locked
(b)
counting the inventory at the end of the accounting period and comparing it with
the
inventory ledger clerk’s records
(c)
using subsidiary ledgers and a perpetual inventory system
160.
Describe three inventory cost flow assumptions and how they impact the financial statements.
Chapter 7: Inventories
161.
The following data regarding purchases and sales of a commodity were taken from the related perpetual
inventory
account:
June 1
Balance
25 units at $60
6
Sale
20 units
8
Purchase
20 units at $61
16
Sale
10 units
20
Purchase
20 units at $62
23
Sale
25 units
30
Purchase
15 units at $63
Calculate the cost of the ending inventory at June 30, using (a) the first-in, first-out
(FIFO)
method and (b) the last-in, first-out (LIFO) method. Identify the quantity, unit
price, and
total cost of each lot in the inventory.
Chapter 7: Inventories
162.
Beginning inventory, purchases, and sales data for hammers are as follows:
Mar. 3
Inventory
12 units
@
$15
11
Purchase
13 units
@
$17
14
Sale
18 units
21
Purchase
9 units
@
$20
25
Sale
10 units
Assuming the business maintains a perpetual inventory system, complete the inventory cards and calculate the
cost
of merchandise sold and ending inventory under the following assumptions:
(a)
First-in, first-out
Purchases
Cost of
Merchandise Sold
Inventory
Date
Qty.
Unit
Cost
Total
Cost
Qty.
Unit
Cost
Total
Cost
Qty.
Unit
Cost
Total
Cost
Mar.
3
11
14
21
25
Balances
(b)
Last-in, first-out
Purchases
Cost of
Merchandise Sold
Inventory
Date
Qty.
Unit
Cost
Total
Cost
Qty.
Unit
Cost
Total
Cost
Qty.
Unit
Cost
Total
Cost
Mar.
3
11
14
21
25
Balances
Chapter 7: Inventories
Chapter 7: Inventories
163.
The units of an item available for sale during the year were as follows:
Jan. 1 Inventory 25 units at $45
Mar. 4 Purchase 15 units at $50
June 7 Purchase 35 units at $58
Nov. 15 Purchase 20 units at $65
There are 30 units of the item in the physical inventory at December 31. The periodic inventory system is
used. Determine the ending inventory cost using FIFO.
164.
The units of an item available for sale during the year were as follows:
Jan. 1
Inventory
10 units at $25
Apr. 4
Purchase
15 units at $24
May. 20
Purchase
20 units at $28
Oct. 30
Purchase
18 units at $30
There are 19 units of the item in the physical inventory at December 31. The periodic inventory system is
used. Determine the ending inventory cost using LIFO.
Chapter 7: Inventories
165.
The beginning inventory and purchases of an item for the period were as follows:
Beginning inventory 6 units at $70 each
First purchase 10 units at $75 each
Second purchase 18 units at $80 each
Third purchase 10 units at $90 each
The company uses the periodic system, and there were 15 units in the inventory at the end of the period. Determine
the cost of the 15 units in the inventory by each of the following methods, presenting details of
your computations:
(a) first-in, first-out; (b) last-in, first-out; (c) average cost. Do not round your intermediate
calculations. Round your
final answer to two decimal places.
Chapter 7: Inventories
166.
Beginning inventory, purchases and sales data for T-shirts are as follows:
April 3
Inventory
24 units
@
$10
11
Purchase
26 units
@
$12
14
Sale
36 units
21
Purchase
18 units
@
$15
25
Sale
20 units
Assuming the business maintains a periodic inventory system; calculate the cost of merchandise sold and ending
inventory under the following assumptions:
a.
FIFO
b.
LIFO
c.
Average cost (round cost of merchandise sold and ending inventory to the nearest dollar)
Chapter 7: Inventories