ACCOUNTING

9. A company just starting business made the following four inventory purchases in June:

June 1 150 units $ 390

June 10 200 units 585

June 15 200 units 630

June 28 150 units 510

$2,115

A physical count of merchandise inventory on June 30 reveals that there are 200 units

on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold

for June is

Answer: ________

A) $536.

B) $668.

C) $1,447.

D) $1,564.

10. A company just starting business made the following four inventory purchases in June:

June 1 150 units $ 390

June 10 200 units 585

June 15 200 units 630

June 28 150 units 510

$2,115

A physical count of merchandise inventory on June 30 reveals that there are 200 units

on hand. Using the average-cost method, the amount allocated to the ending inventory

on June 30 is

A) $536. Answer: ________

B) $604.

C) $668.

D) $1,511.

Page 6 of 9

11. A company just starting business made the following four inventory purchases in June:

June 1 150 units $ 390

June 10 200 units 585

June 15 200 units 630

June 28 150 units 510

$2,115

A physical count of merchandise inventory on June 30 reveals that there are 200 units

on hand.

The inventory method which results in the highest gross profit for June is

Answer: ________

A) the FIFO method.

B) the LIFO method.

C) the weighted average unit cost method.

D) not determinable.

12. Evergreen Company’s inventory records show the following data:

Units Unit Cost

Inventory, January 1 5,000 $9.20

Purchases: June 18 4,500 8.00

November 8 3,000 7.00

A physical inventory on December 31 shows 2,000 units on hand. Evergreen sells the

units for $13 each. The company has an effective tax rate of 20%. Evergreen uses the

periodic inventory method. The weighted-average cost per unit is

Answer: ________

A) $8.00.

B) $8.01.

C) $8.24.

D) $9.30.

Page 7 of 9

13. The Costco Company accumulates the following cost and market data at December 31,

2012:

Inventory Categories Cost Data Market Data

Camera $11,000 $9,900

Camcorders 7,800 8,500

DVDs 14,000 12,000

Record the Journal Entry for necessary adjustments using the lower-of-cost-or-market

value of the inventory method as of December 31, 2012.

14. At December 31, 2012, the following information was available for Westinghouse

Company: ending inventory $22,600; beginning inventory $21,400; cost of goods sold

$171,000; and sales revenue $430,000.

Calculate the inventory turnover ratio and days in inventory for Westinghouse.

15. The following information is available for LiteBrite Company:

Beginning inventory 600 units at $4

First purchase 900 units at $6

Second purchase 500 units at $7.20

Assume that LiteBrite uses a periodic inventory system and that there are 700 units left

at the end of the month.

Instructions

Compute the cost of ending inventory under the

(a) FIFO method.

(b) LIFO method.

Page 8 of 9

16. The following information is available for LiteBrite Company:

Beginning inventory 600 units at $4

First purchase 900 units at $6

Second purchase 500 units at $7.20

Assume that LiteBrite uses a periodic inventory system and that there are 700 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.

17. Walgreen Pharmacy reported cost of goods sold as follows:

2012 2013

Beginning inventory $ 54,000 $ 64,000

Cost of goods purchased 847,000 891,000

Cost of goods available for sale 901,000 955,000

Ending inventory 64,000 55,000

Cost of goods sold $837,000 $900,000

Lincoln, the accountant, made two errors:

(1) 2012 ending inventory was overstated by $7,000.

(2) 2013 ending inventory was understated by $16,000.

Instructions

Assuming the errors had not been corrected, indicate the dollar effect that the errors had

on the items appearing on the financial statements listed below. Also indicate if the

amounts are overstated (O) or understated (U).

2012 2013

Overstated/ Overstated/

Amount Understated Amount Understated

Total assets $_________ _______ $_________ _______

Owner’s equity

$_________

_______

$_________

_______

Cost of goods sold

$_________

_______

$_________

_______

Net income

$_________

_______

$_________

_______

Page 9 of 9

18. Wyman’s Department Store prepares monthly financial statements but only takes a

physical count of merchandise inventory at the end of the year. The following

information has been developed for the month of July:

At Cost At Retail

Beginning inventory $ 30,000 $ 50,000

Merchandise purchases 99,000 150,000

The net sales for July amounted to $142,000.

Instructions

Use the retail inventory method to estimate the ending inventory at cost for July. Show

all computations to support your answer.

19. FIFO and LIFO are the two most common cost flow assumptions made in costing

inventories. The amounts assigned to the same inventory items on hand may be different

under each cost flow assumption. If a company has no beginning inventory, explain the

difference in ending inventory values under the FIFO and LIFO cost bases when the

price of inventory items purchased during the period have been (1) increasing, (2)

decreasing, and (3) remained constant.

20. Compute the lower-of-cost-or-market valuation (and prepare any necessary adjusting

entries as of March 31, 2013) for DeBartolo Company’s total inventory based on the

following:

Inventory Categories Cost Data Market Data

A as of 3/31/2013 $18,000 $16,900

B as of 3/31/2013 13,900 14,600

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