Question 1

Queen Company is in the electronics industry and the price it pays for inventory is decreasing.
Instructions
Indicate which inventory method will:
a. provide the highest ending inventory.
b. provide the highest cost of goods sold.
c. result in the highest net income.
d. result in the lowest income tax expense.
e. produce the most stable earnings over several years.

Accepted Answer

The answer of Queen Company is in the electronics industry...

Question 2

Liche Company reported net income of $54000 in 2016 and $80000 in 2017. However ending inventory was overstated by $6000 in 2016.
Instructions
Compute the correct net income for Liche Company for 2016 and 2017.

Accepted Answer

The answer of Liche Company reported net income of $54000...

Question 3

Tyler Company reported the following summarized annual data at the end of 2016: $\begin{array}{lr}
\text { Sales revenue } & \$ 1,000,000 \
\text { Cost of goods sold }{ }^{*} & \underline{ 600,000} \
\text { Gross margin } & 400,000 \
\text { Operating expenses } &  \underline{280,000} \
\text { Income before income taxes } & \$ 120,000
\end{array}$

"Based on an ending FIFO inventory of $\$ 240,000$.
 The income tax rate is 30%. The controller of the company is considering a switch from FIFO to LIFO. He has determined that on a LIFO basis the ending inventory would have been $150000.
Instructions
(a) Restate the summary information on a LIFO basis.
(b) What effect if any would the proposed change have on Tyler's income tax expense net income and cash flows?
(c) If you were an owner of this business what would your reaction be to this proposed change?

Accepted Answer

The answer of Tyler Company reported the following summarized annual...

Question 4

Shellhammer Company's inventory records show the following data for the month of September: $$\begin{array} { l c c } 
& \underline { \text { Units} } & \underline { \text { Unit Cost } }  \
\text { Inventory, September 1 } &100& \$ 3.34 \
\text { Purchases: September 8 } & 450 & 3.50 \
\quad\quad\quad\quad\quad\text { September 18 }& 350 & 3.70
\end{array}$$ A physical inventory on September 30 shows 200 units on hand. Calculate the value of ending inventory and cost of goods sold if the company uses FIFO inventory costing and a periodic inventory system.

Accepted Answer

The answer of Shellhammer Company's inventory records show the following...

Question 5

Flite Company had beginning inventory on May 1 of $12000. During the month the company made purchases of $38000 but returned $2000 of goods because they were defective. At the end of the month the inventory on hand was valued at $16500.
Calculate cost of goods available for sale and cost of goods sold for the month.

Accepted Answer

The answer of Flite Company had beginning inventory on May...

Question 6

Ford Co. uses a periodic inventory system. Its records show the following for the month of May in which 75 units were sold. $\begin{array}{llccc}
&& \underline{\text { Units}}& \underline{\text {  Unit Cost }}& \underline{\text { Total Cost }}\
\text { May}& 1 \text { Inventory } & 35 & \$ 8&\$280 \
&15 \text { Purchases } & 30 & 12&360 \
&24 \text { Purchases } &  \underline{40} & 13 & \underline{520}\
&\text { Totals }& \underline{105}&& \underline{\$1.160}
\end{array}$ Instructions
Compute the ending inventory at May 31 and cost of goods sold using the FIFO and LIFO methods. Prove the amount allocated to cost of goods sold under each method.

Accepted Answer

The answer of Ford Co. uses a periodic inventory system....

Question 7

Tipp Topp Company reports the following for the month of June. $\begin{array}{rlcr}
& \underline{\text { Units}}& \underline{\text {  Unit Cost }}& \underline{\text { Total Cost }}\
\text { June } 1 \text { Inventory } & 300 & \$ 5 & \$ 1,500 \
12 \text { Purchase } & 450 & 6 & 2,700 \
23 \text { Purchase } & 750 & 7.60 & 5,700 \
30 \text { Inventory } & 180 & &
\end{array}$
 Instructions
(a) Compute the cost of the ending inventory and the cost of goods sold under (1) FIFO and (2) LIFO.
(b) Compute the cost of the ending inventory and the cost of goods sold using the average-cost method.

Accepted Answer

The answer of Tipp Topp Company reports the following for...

Question 8

Mesa Company's inventory records show the following data for the month of September: $$\begin{array} { l c c } 
& \underline { \text { Units} } & \underline { \text { Unit Cost } }  \
\text { Inventory, September 1 } &100& \$ 3.35 \
\text { Purchases: September8 } & 450 & 3.50 \
\quad\quad\quad\quad\quad\text { September 18 }& 350 & 3.70
\end{array}$$
 A physical inventory on September 30 shows 250 units on hand. Calculate the value of ending inventory and cost of goods sold if the company uses LIFO inventory costing and a periodic inventory system.

Accepted Answer

The answer of Mesa Company's inventory records show the following...

Question 9

Determine the difference in the amount of income that the company would have reported if it had used the FIFO method instead of the LIFO method. Would income have been greater or less?

Accepted Answer

The answer of Determine the difference in the amount of...

Question 10

At December 31 2016 the following information was available for Deen Company: ending inventory $22600; beginning inventory $21400; cost of goods sold $171000; and sales revenue $430000.
Calculate the inventory turnover and days in inventory for Deen.

Accepted Answer

The answer of At December 31 2016 the following information...

Question 11

James Supply Company reports net income of $120000 in 2016. The ending inventory did not include goods valued at $9000 that James had consigned to Eli's Gift Shop.
(1) What is the correct net income for 2016?
(2) What impact will this error have on the balance sheet at 12/31/16?

Accepted Answer

The answer of James Supply Company reports net income of...

Question 12

The following accounts are included in the ledger of Bainbridge Company:
Advertising expense
Freight-in
Inventory
Purchases
Purchase returns and allowances
Sales revenue
Sales returns and allowances
Which of the accounts would be included in calculating cost of goods sold?

Accepted Answer

The answer of The following accounts are included in the...

Question 13

Lester Company sells many products. Hackenberry is one of its popular items. Below is an analysis of the inventory purchases and sales of Hackenberry for the month of March. Lester Company uses the periodic inventory system.  Instructions
(a) Using the FIFO assumption calculate the amount charged to cost of goods sold for March. (Show computations)
(b) Using the weighted average method calculate the amount assigned to the inventory on hand on March 31. (Show computations)
(c) Using the LIFO assumption calculate the amount assigned to the inventory on hand on March 31. (Show computations)

Accepted Answer

The answer of Lester Company sells many products. Hackenberry is...

Question 14

Pearl Company uses the periodic inventory system to account for inventories. Information related to Pearl Company's inventory at October 31 is given below: $\begin{array}{rllrl}
\text { October } 1 & \text { Beginning inventory } & 400 \text { units } @ \$ 9.60= & \$ 3,840 \
8 & \text { Purchase } & 800 \text { units } @ \$ 10.40= & 8,320 \
16 & \text { Purchase } & 600 \text { units } @ \$ 10.80= & 6,480 \
24 & \text { Purchase } & 200  \text { units } @ \$ 11.80= & \underline{2,360} \
& \text { Total units and cost } & 2,000  \text { units } & \$ 21,000
\end{array}$
 Instructions
1. Show computations to value the ending inventory using the FIFO cost assumption if 600 units remain on hand at October 31.
2. Show computations to value the ending inventory using the weighted-average cost method if 600 units remain on hand at October 31.
3. Show computations to value the ending inventory using the LIFO cost assumption if 600 units remain on hand at October 31.

Accepted Answer

The answer of Pearl Company uses the periodic inventory system...

Question 15

The following information is available for Clancy Company: $\begin{array}{ll}
\text { Beginning inventory } & 600 \text { units at } \$ 4 \
\text { First purchase } & 900 \text { units at } \$ 6 \
\text { Second purchase } & 500 \text { units at } \$ 7.20
\end{array}$ Assume that Clancy uses a periodic inventory system and that there are 760 units left at the end of the month.
Instructions
Compute each of the following under the average-cost method:
(a) Cost of ending inventory.
(b) Cost of goods sold.

Accepted Answer

The answer of The following information is available for Clancy...

Question 16

The Vogelson Company accumulates the following cost and market value data at December 31. $\begin{array}{ccc}
&&\text { Market }\
 \underline{\text { Inventory Categories } }& \underline{\text { Cost Data } }& \underline{\text { Value Data }}\
\text { Camera } & \$ 11,000 & \$ 9,900 \
\text { Camcorders } & 7,800 & 8,500 \
\text { DVDs } & 14,000 & 12,000
\end{array}$
 What is the lower-of-cost-or-market of the inventory?

Accepted Answer

The answer of The Vogelson Company accumulates the following cost...

Question 17

Morton Watch Company reported the following income statement data for a 2-year period. $\begin{array}{lcc}
& \underline{2016}& \underline{2017}\
  \text { Sales revenue } & \underline{\$260,000}& \underline{\$320,000}\
 \text { Cost of goods sold } &\
 \text { Beginning inventory } &32,000&44,000\
 \text {  Cost of goods purchased} & \underline{193,000}& \underline{225,000}\
 \text {  Cost of goods available for sale} &225,000&269,000\
 \text { Ending inventory } & \underline{44,000}& \underline{57,000}\
 \text {  Cost of goods sold} & \underline{181,000}& \underline{212,000}\
 \text { Gross profit } & \underline{\$79,000}& \underline{\$108,000}\
\end{array}$
 Mortan uses a periodic inventory system. The inventories at January 1 2016 and December 31 2017 are correct. However the ending inventory at December 31 2016 was overstated $5000.
Instructions
(a) Prepare correct income statement data for the 2 years.
(b) What is the cumulative effect of the inventory error on total gross profit for the 2 years?

Accepted Answer

The answer of Morton Watch Company reported the following income...

Question 18

Shellhammer Company's inventory records show the following data for the month of September: $$\begin{array} { l c c } 
& \underline { \text { Units} } & \underline { \text { Unit Cost } }  \
\text { Inventory, September 1 } &100& \$ 3.34 \
\text { Purchases: September 8 } & 450 & 3.50 \
\quad\quad\quad\quad\quad\text { September 18 }& 350 & 3.70
\end{array}$$
 A physical inventory on September 30 shows 200 units on hand. Calculate the value of the ending inventory and cost of goods sold if the company uses weighted average inventory costing and a periodic inventory system. Round cost per unit to 2 decimal places and ending inventory and cost of goods sold to the nearest dollar.

Accepted Answer

The answer of Shellhammer Company's inventory records show the following...

Question 19

The following information is available for Clancy Company: $\begin{array}{ll}
\text { Beginning inventory } & 600 \text { units at } \$ 4 \
\text { First purchase } & 900 \text { units at } \$ 6.50 \
\text { Second purchase } & 500 \text { units at } \$ 7.20
\end{array}$ Assume that Clancy uses a periodic inventory system and that there are 760 units left at the end of the month.
Instructions
Compute the cost of ending inventory under the
(a) FIFO method.
(b) LIFO method.

Accepted Answer

The answer of The following information is available for Clancy...

Question 20

For each of the independent events listed below analyze the impact on the indicated items at the end of the current year by placing the appropriate code letter in the box under each item.
Code: O = item is overstated
U = item is understated
NA = item is not affected

Accepted Answer

The answer of For each of the independent events listed...

Quiz 6: Inventories

Liche Company reported net income of $54000 in 2016 and $80000 in 2017. However ending inventory was overstated by $6000 in 2016. Instructions Compute the correct net income for Liche Company for 2016 and 2017.

Determine the difference in the amount of income that the company would have reported if it had used the FIFO method instead of the LIFO method. Would income have been greater or less?

At December 31 2016 the following information was available for Deen Company: ending inventory $22600; beginning inventory $21400; cost of goods sold $171000; and sales revenue $430000. Calculate the inventory turnover and days in inventory for Deen.

James Supply Company reports net income of $120000 in 2016. The ending inventory did not include goods valued at $9000 that James had consigned to Eli's Gift Shop. (1) What is the correct net income for 2016? (2) What impact will this error have on the balance sheet at 12/31/16?

The following accounts are included in the ledger of Bainbridge Company: Advertising expense Freight-in Inventory Purchases Purchase returns and allowances Sales revenue Sales returns and allowances Which of the accounts would be included in calculating cost of goods sold?

For each of the independent events listed below analyze the impact on the indicated items at the end of the current year by placing the appropriate code letter in the box under each item. Code: O = item is overstated U = item is understated NA = item is not affected