Question #1: Triple Creek Hardware Store currently uses a periodic inventory system. Kevin Carlton, the owner, is considering the purchase of a computer system that would make it feasible to switch to a perpetual inventory system. Kevin is unhappy with the periodic inventory system because it does not provide timely information on inventory levels. Kevin has noticed on several occasions that the store runs out of good-selling items, while too many poor-selling items are on hand. Kevin is also concerned about lost sales while a physical inventory is being taken. Triple Creek Hardware currently takes a physical inventory twice a year. To minimize distractions, the store is closed on the day inventory is taken. Kevin believes that closing the store is the only way to get an accurate inventory count. a. Will switching to a perpetual inventory system strengthen Triple Creek Hardware's control over inventory items? Yes or no? b. Will switching to a perpetual inventory system eliminate the need for a physical inventory count? Yes or no
Question #1:
Triple Creek Hardware Store currently uses a periodic inventory system. Kevin Carlton, the owner, is considering the purchase of a computer system that would make it feasible to switch to a perpetual inventory system.
Kevin is unhappy with the periodic inventory system because it does not provide timely information on inventory levels. Kevin has noticed on several occasions that the store runs out of good-selling items, while too many poor-selling items are on hand.
Kevin is also concerned about lost sales while a physical inventory is being taken. Triple Creek Hardware currently takes a physical inventory twice a year. To minimize distractions, the store is closed on the day inventory is taken. Kevin believes that closing the store is the only way to get an accurate inventory count.
a. Will switching to a perpetual inventory system strengthen Triple Creek Hardware's control over inventory items? Yes or no?
b. Will switching to a perpetual inventory system eliminate the need for a physical inventory count? Yes or no?
Hardcase Luggage Shop is a small retail establishment located in a large shopping mall. This shop has implemented the following procedures regarding inventory items:
- Because the shop carries mostly high-quality, designer luggage, all inventory items are tagged with a control device that activates an alarm if a tagged item is removed from the store. Appropriate or Inappropriate?
- Because the display area of the store is limited, only a sample of each piece of luggage is kept on the selling floor. Whenever a customer selects a piece of luggage, the salesclerk gets the appropriate piece from the store’s stockroom. Because all salesclerks need access to the stockroom, it is not locked. The stockroom is adjacent to the break room used by all mall employees. Appropriate or Inappropriate?
- Whenever Hardcase Luggage Shop receives a shipment of new inventory, the items are taken directly to the stockroom. Hardcase's accountant uses the vendor's invoice to record the amount of inventory received. Appropriate or Inappropriate?
Question #7:
The following units of an item were available for sale during the year:
| Beginning inventory | 21,600 units at $20.00 |
| Sale | 14,400 units at $40.00 |
| First purchase | 48,000 units at $25.20 |
| Sale | 36,000 units at $40.00 |
| Second purchase | 45,000 units at $26.40 |
| Sale | 33,000 units at $40.00 |
The firm uses the perpetual inventory system, and there are 31,200 units of the item on hand at the end of the year.
a. What is the total cost of the ending inventory according to FIFO?
b. What is the total cost of the ending inventory according to LIFO?
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