Chapter 7: Inventories
117.
On the basis of the following data, what is the estimated cost of the merchandise inventory on May 31 using
the
retail method?
Cost
Retail
May 1
Merchandise inventory
$125,000
$166,667
May 1-31
Purchases
235,000
313,333
May 1-31
Sales
230,000
a. $250,000
b. $360,000
c. $172,500
d. $187,500
118.
If the estimated rate of gross profit is 30%, what is the estimated cost of the merchandise inventory on September
30, based on the following data?
Sep. 1
Merchandise inventory (at cost)
$125,000
Sep. 1-30
Purchases, net (at cost)
300,000
Sep. 1-30
Sales, net
150,000
a.$320,000
b.$192,500
c.$275,000
d.$105,000
Chapter 7: Inventories
119.
All of the following are reasons to use an estimated method of costing inventory except
a.
Perpetual inventory records are not maintained.
b.
Purchase records are not maintained.
c.
A disaster has destroyed the inventory records and the inventory.
d.
Interim financial statements are required but physical inventory is only taken at the end of the
financial
accounting period.
120.
Garrison Company uses the retail method of inventory costing. It started the year with an inventory that had a
retail cost of $45,000. During the year, Garrison purchased an inventory with a retail sales value of $300,000.
After performing a physical inventory, Garrison calculated the inventory at retail to be $80,000. The
mark up is
100% of cost. Determine the ending inventory at its estimated cost.
a. $160,000
b. $80,000
c. $40,000
d. $45,000
121.
A company will most likely use an estimated method of determining inventory when
a.
the company decides not to do a physical inventory
b.
a natural disaster has destroyed most of the inventory
c.
the company has not kept up with its inventory records
d.
the company is preparing annual financial statements
Chapter 7: Inventories
122.
Stevens Company started the year with an inventory cost of $145,000. During the month of January,
Stevens
purchased inventory that cost $53,000. January sales totaled $140,000. Estimated gross profit is
35%. The
estimated ending inventory as of January 31 is
a. $58,000
b. $91,000
c. $107,000
d. $69,300
123.
Determine the total value of the merchandise using net realizable value.
Item
Quantity
Selling Price
Commission
Doll
10
$7
$2
Horse
5
9
3
a. $35
b. $80
c. $115
d. $25
Chapter 7: Inventories
124.
If a company values inventory at the lower of cost or market, which of the following is the value of
merchandise
inventory on the balance sheet? Apply the lower-of-cost-or-market method to inventory as a
whole.
Item
Inventory Quantity
Unit Cost Price
Unit Market Price
Product C
420
$ 6
$ 5
Product D
370
12
14
a. $6,960
b. $7,700
c. $6,540
d. $7,280
125.
Safeguarding inventory from damage or theft is a primary objective for the control of inventory. If you
were
running a clothing store, name three specific controls you would implement to guard inventory from
theft.
126.
List three different security measures taken to safeguard inventory.
Chapter 7: Inventories
127.
Three identical units of merchandise were purchased during March, as shown:
Steele Plate
Units
Cost
Mar. 3
Purchase
1
$ 830
10
Purchase
1
840
19
Purchase
1
880
Total
3
$2,550
Assume that one unit is sold on March 23 for $1,125. Determine the gross profit for March and ending inventory
on
March 31 using (a) FIFO, (b) LIFO, and (c) average cost methods.
Chapter 7: Inventories
128.
Three identical units of merchandise were purchased during May, as follows:
Magnesium XP
Units
Cost
May 3
Purchase
1
$130
10
Purchase
1
136
19
Purchase
1
142
Total
3
$408
Assume that two units are sold on May 23 for $313 total. Determine the gross profit for May and ending
inventory
on May 31 using (a) FIFO, (b) LIFO, and (c) average cost methods.
Gross Profit
Ending Inventory
First-in, first-out (FIFO)
$47 [$313 – ($130 + $136)]
$142
Last-in, first-out (LIFO)
$35 [$313 – ($142 + $136)]
$130
Average cost
$408/3 = $136 average cost
$41 [$313 – ($136 × 2 units)]
$136
Chapter 7: Inventories
129.
Assume that three identical units of merchandise were purchased during October, as follows:
Units
Cost
October
5
Purchase
1
$ 5
12
Purchase
1
13
28
Purchase
1
15
Total
3
$33
Assume one unit is sold on October 31 for $28. Determine cost of merchandise sold, gross profit, and ending
inventory under the LIFO method.
Chapter 7: Inventories
130.
Assume that three identical units of merchandise were purchased during October, as follows:
Units
Cost
October
5
Purchase
1
$ 5
12
Purchase
1
13
28
Purchase
1
15
Total
3
$33
Assume one unit is sold on October 31 for $28. Determine cost of merchandise sold, gross profit, and ending
inventory under the average cost method.
Chapter 7: Inventories
131.
Assume that three identical units of merchandise are purchased during October, as follows:
Units
Cost
October
5
Purchase
1
$ 5
12
Purchase
1
13
28
Purchase
1
15
Total
3
$33
Assume one unit is sold on October 31 for $28. Determine cost of merchandise sold, gross profit, and ending
inventory under the FIFO method.
October 31
Sales
Cost of merchandise sold
Gross profit
Chapter 7: Inventories
132.
Three identical units of merchandise were purchased during July, as follows:
Date
Product Basic H
Units
Cost
July 3
Purchase
1
$ 35
10
Purchase
1
36
24
Purchase
1
37
Total
3
$108
Average cost per unit
$ 36
Assume one unit sells on July 28 for $45.
Determine the gross profit, cost of merchandise sold, and ending inventory on July 31 using (a) first-in, first-out,
(b)
last-in, first-out, and (c) average cost flow methods.
Chapter 7: Inventories
133.
Beginning inventory, purchases, and sales for an inventory item are as follows:
Sep. 1
Beginning inventory
24 units
@
$15
5
Sale
17 units
17
Purchase
10 units
@
$20
30
Sale
8 units
Assuming a perpetual inventory system and the first-in, first-out method, determine (a) the cost of the
merchandise
sold for the September 30 sale and (b) the inventory on September 30.
134.
Beginning inventory, purchases, and sales for an inventory item are as follows:
Beginning inventory
150 units @ $755
Sale
120 units
First purchase
400 units @ $785
Sale
200 units
Second purchase
300 units @ $805
Sale
290 units
The firm uses the perpetual inventory system and there are 240 units of the item on hand at the end of the year.
What is the total cost of ending inventory according to FIFO?
Chapter 7: Inventories
135.
Beginning inventory, purchases, and sales for an inventory item are as follows:
Beginning inventory
150 units @ $755
Sale
120 units
First purchase
400 units @ $785
Sale
200 units
Second purchase
300 units @ $805
Sale
290 units
The firm uses the perpetual inventory system and there are 240 units of the item on hand at the end of the year.
What is the total cost of ending inventory according to LIFO?
136.
Beginning inventory, purchases, and sales for an inventory item are as follows:
Sep. 1
Beginning inventory
24 units
@
$10
5
Sale
17 units
17
Purchase
10 units
@
$15
30
Sale
8 units
Assuming a perpetual inventory system and the last-in, first-out method, determine (a) the cost of the
merchandise
sold for the September 30 sale and (b) the inventory on September 30.
Chapter 7: Inventories
137.
Using a LIFO perpetual cost flow, calculate the value of the ending inventory and the cost of merchandise sold
for
the month of November of Beamer Company using the data below.
Nov. 1
Purchased
600 units
$80 each
4
Sold
200 units
11
Purchased
350 units
$82 each
12
Sold
275 units
22
Purchased
175 units
$84 each
23
Sold
155 units
Calculate the following:
(a)
Inventory valuation at the end of November
(b)
Calculate the cost of merchandise sold for November
Chapter 7: Inventories
138.
Complete the following table using the perpetual FIFO method of inventory flow.
Inventory Valuation—Perpetual FIFO
Date
Purchased
Units
Unit
Cost
Units
Sold
Unit
Cost
Inventory
Units
Balance
Unit
Costs
Inventory
Dollar
Balance
July 2
600
$12
Bal.
July 5
200
$13
Bal.
July 7
300
Bal.
July 10
325
$14
Bal.
July 12
300
150
Bal.
July 18
250
$13
Bal.
July 22
50
205
Bal.
July 25
120
180
Bal.
July 28
330
$15
Bal.
July 31
70
5
Ending
Balance
FIFO INVENTORY
VALUATION:
Chapter 7: Inventories
Chapter 7: Inventories
139.
Beginning inventory, purchases, and sales data for tennis rackets are as follows:
April 3
Inventory
12 units
@
$45
11
Purchase
13 units
@
$47
14
Sale
18 units
21
Purchase
9 units
@
$60
25
Sale
10 units
Complete the inventory cost card assuming the business maintains a perpetual inventory system and calculates the
cost
of merchandise sold and ending inventory using FIFO.
Purchases
Cost of
Merchandise Sold
Inventory
Date
Qty.
Unit
Cost
Total
Cost
Qty.
Unit
Cost
Total
Cost
Qty.
Unit
Cost
Total
Cost
Balances
Chapter 7: Inventories
140.
Beginning inventory, purchases, and sales data for tennis rackets are as follows:
April 3
Inventory
12 units
@
$45
11
Purchase
13 units
@
$47
14
Sale
18 units
21
Purchase
9 units
@
$60
25
Sale
10 units
Complete the inventory cost card assuming the business maintains a perpetual inventory system and calculates
the
cost of merchandise sold and ending inventory using LIFO.
Purchases
Cost of
Merchandise Sold
Inventory
Date
Qty.
Unit
Cost
Total
Cost
Qty.
Unit
Cost
Total
Cost
Qty.
Unit
Cost
Total
Cost
Balances
Chapter 7: Inventories
141.
Beginning inventory, purchases, and sales data for widgets are as follows:
April 3
Inventory
15 units
@
$30
11
Purchase
12 units
@
$27
14
Sale
18 units
21
Purchase
7 units
@
$25
25
Sale
10 units
Complete the inventory cost card assuming the business maintains a perpetual inventory system and calculates
the
cost of merchandise sold and ending inventory using FIFO.
Purchases
Cost of
Merchandise Sold
Inventory
Date
Qty.
Unit
Cost
Total
Cost
Qty.
Unit
Cost
Total
Cost
Qty.
Unit
Cost
Total
Cost
Balances
Chapter 7: Inventories
142.
Beginning inventory, purchases, and sales data for widgets are as follows:
April 3
Inventory
15 units
@
$30
11
Purchase
12 units
@
$27
14
Sale
18 units
21
Purchase
7 units
@
$25
25
Sale
10 units
Complete the inventory cost card assuming the business maintains a perpetual inventory system and calculates
the
cost of merchandise sold and ending inventory using LIFO.
Purchases
Cost of
Merchandise Sold
Inventory
Date
Qty.
Unit
Cost
Total
Cost
Qty.
Unit
Cost
Total
Cost
Qty.
Unit
Cost
Total
Cost
Balances
Chapter 7: Inventories
143.
The units of an item available for sale during the year were as follows:
January 10
Inventory
27 units @ $90
February 27
Purchase
54 units @ $98
July 11
Purchase
63 units @ $106
November 13
Purchase
36 units @ $115
There are 50 units of the item in the physical inventory at December 31. The periodic inventory system is used.
Determine the ending 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.