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Exercise 8–25
Set the base year, 1/1/16, equal to 1.00.
Cost index in layer year: 264 ÷ 240 = 1.10
Ending Inventory Inventory Layers Inventory Layers Inventory
Date at Base Year Cost at Base Year Cost Converted to Cost DVL Cost
8–42 Intermediate Accounting, 8/e
Exercise 8–26
List A List B
i 1. Perpetual inventory a. Legal title passes when goods are
system delivered to common carrier.
CPA / CMA REVIEW QUESTIONS
CPA Exam Questions
1. d.
CMA Exam Questions
1. c. The company began March with 3,200 units in inventory at $64.30 each.
The March 4 purchase added 3,400 additional units at $64.75 each. Under
FIFO, the 3,600 units sold on March 14 were the oldest units. That sale
Problem 8–1
Requirement 1
a. To record the purchase of inventory on account and the payment of freight
charges.
October 12, 2016
Purchases (98% x $22,000) ................................................ 21,560
b. To record payment of accounts payable.
October 31, 2016
PROBLEMS
8–46 Intermediate Accounting, 8/e
Problem 8–1 (continued)
c. To record sales on account.
October 2016
Cost of goods sold:
Beginning inventory $15,000
Plus net purchases:
Adjusting entry:
October 31, 2016
Cost of goods sold (above) ............................................... 18,000
Problem 8–1 (concluded)
Requirement 2
a. To record the purchase of inventory on account and the payment of freight
charges.
October 12, 2016
Inventory (98% x $22,000) ................................................ 21,560
b. To record payment of accounts payable.
October 31, 2016
c. To record sales on account.
October 2016
8–48 Intermediate Accounting, 8/e
Problem 8–2
1. The transaction is not correctly accounted for. Inventory held on consignment by
2. The transaction is not correctly accounted for. Legal title to merchandise shipped
3. The transaction is not correctly accounted for. Since the merchandise was shipped
2017.
4. The transaction is correctly accounted for. Merchandise held on consignment from
5. The transaction is correctly accounted for. Since the merchandise was shipped
Problem 8–3
Accounts
Inventory Payable Sales
Initial amounts $1,250,000 $1,000,000 $9,000,000
Adjustments - increase (decrease):
1. (155,000) (155,000) NONE
Problem 8–4
Requirement 1
Beginning inventory (10,000 x $8.00) $ 80,000
Net purchases:
Purchases (50,000* units x $10.00) $500,000
Requirement 2
Sales (45,000 units x $18.00) $810,000
Problem 8–5
Cost of goods available for sale for periodic system:
Beginning inventory (6,000 x $8.00) $ 48,000
Purchases:
1. FIFO, periodic system
Cost of goods available for sale (17,000 units) $153,000
Cost of ending inventory:
Date of
purchase Units Unit cost Total cost
Jan. 10 2,000 $ 9.00 $18,000
Problem 8–5 (continued)
2. LIFO, periodic system
Cost of goods available for sale (17,000 units) $153,000
Less: Ending inventory (determined below) (66,000)
Cost of goods sold $ 87,000
Cost of ending inventory:
Date of
purchase Units Unit cost Total cost
Beg. Inv. 6,000 $8.00 $48,000
8–52 Intermediate Accounting, 8/e
Problem 8–5 (continued)
3. LIFO, perpetual system
Date
Purchased
Sold
Balance
Beginning
inventory
6,000 @ $8.00 = $48,000
6,000 @ $8.00 $48,000
January 5
3,000 @ $8.00 = $24,000
3,000 @ $8.00 $24,000
4. Average cost, periodic system
Cost of goods available for sale (17,000 units) $153,000
Less: Ending inventory (below) (72,000)
Problem 8–5 (concluded)
5. Average cost, perpetual system
Date
Purchased
Sold
Balance
Beginning
inventory
6,000 @ $8.00 = $48,000
6,000 @ $8.00 $48,000
8–54 Intermediate Accounting, 8/e
Problem 8–6
Requirement 1
Cost of goods available for sale for periodic system:
Purchases:
5,000 x $4.00 $20,000
a. FIFO
Cost of goods available for sale (34,000 units) $159,000
b. LIFO
Cost of goods available for sale (34,000 units) $159,000
Problem 8–6 (concluded)
c. Average cost
Cost of goods available for sale (34,000 units) $159,000
Less: Ending inventory (below) (65,471)
Cost of goods sold $ 93,529*
Cost of ending inventory:
Gross Profit ratio:
FIFO: $51,000* ÷ $140,000** = 36%
Requirement 2
In situations when costs are rising, LIFO results in a higher cost of goods sold
8–56 Intermediate Accounting, 8/e
Problem 8–7
Requirement 1
Beginning inventory ($60,000 + 60,000 + 63,000) $183,000
Purchases:
211 $63,000
212 63,000
Requirement 2
Cost of goods available for sale $798,300
Cost of ending inventory (3 autos):
Car ID Cost
219 $ 75,000
Problem 8–7 (concluded)
Requirement 3
Cost of goods available for sale $798,300
Cost of ending inventory (3 autos):
Car ID Cost
203 $ 60,000
Requirement 4
Cost of goods available for sale (12 units) $798,300
Cost of ending inventory:
$798,300
8–58 Intermediate Accounting, 8/e
Problem 8–8
Requirement 1
The note indicates that if the company had used FIFO, inventory would have
been higher by $2,504 million and $2,750 million at the end of 2013 and 2012,
Requirement 2
Requirement 3
Problem 8–9
Requirement 1
Beginning inventory $ 450,000
Purchases:
Requirement 2
Cost of goods sold assuming all units purchased at the year 2016 price:
40,000 units x $25.00 = $1,000,000
Problem 8–10
Requirement 1
Cost of goods sold:
2016: 1,000 x $16 = $ 16,000
Requirement 2
LIFO liquidation before-tax profit or loss:
2016: 1,000 units x $2 ($18 – 16) = $2,000 profit
Requirement 3
Disclosure note:
During fiscal 2018, 2017, and 2016, inventory quantities in certain LIFO layers were
