1. (a)
Introduction: LIFO means last in first out. It is an
To compute:
1. (b)
Introduction: FIFO means first in first out. It is an inventory valuation method. The amount incurred on the first product will be realized first. Sales are computed using price of older purchase while inventory is computed using recent purchases.
To compute: Current ratio, inventory turnover, and days’ sales in inventory.
2
Introduction: Inventory valuation is the methods used by the companies to determine the value of ending inventory while preparing the financial statements. Different company uses different valuation methods. Inventory valuation impacts the cost of goods sold and net income.
To comment: On the results of current ratio, inventory turnover, and days’ sales in inventory.
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Chapter 5 Solutions
FINANCIAL & MANAGERIAL ACCOUNTING (ACCES
- Use the first-in, first-out method (FIFO) cost allocation method, with perpetual inventory updating, to calculate (a) sales revenue, (b) cost of goods sold, and c) gross margin for B75 Company, considering the following transactions.arrow_forwardUse the weighted-average (AVG) cost allocation method, with perpetual inventory updating, to calculate (a) sales revenue, (b) cost of goods sold, and c) gross margin for B75 Company, considering the following transactions.arrow_forwardInventory Costing: Average Cost Refer to the information for Filimonov Inc. and assume that the company uses a perpetual inventory system. Required: Calculate the cost of goods sold and the cost of ending inventory using the average cost method. ( Note: Use four decimal places for per-unit calculations and round all other numbers to the nearest dollar.)arrow_forward
- Compute Westtown Companys (A) inventory turnover ratio and (B) number of days sales in inventory ratio, using the following information.arrow_forwardCalculate a) cost of goods sold, b) ending inventory, and c) gross margin for B76 Company, considering the following transactions under three different cost allocation methods and using perpetual inventory updating. Provide calculations for weighted average (AVG).arrow_forwardCalculate a) cost of goods sold, b) ending inventory, and c) gross margin for B76 Company, considering the following transactions under three different cost allocation methods and using perpetual inventory updating. Provide calculations for first-in, first-out (FIFO).arrow_forward
- Compute Altoona Companys (a) inventory turnover ratio and (b) number of days sales in inventory ratio, using the following information.arrow_forwardBased on the data in Exercise 7-15 and assuming that cost was determined by the FIFO method, show how the merchandise inventory would appear on the balance sheet.arrow_forwardUse the following information relating to Singh Company to calculate the inventory turnover ratio and the number of days sales in inventory ratio.arrow_forward
- Compare the calculations for gross margin for A76 Company, based on the results of the perpetual inventory calculations using FIFO, LIFO, and AVG.arrow_forwardBeginning inventory, purchases, and sales for Meta-B1 are as follows: Assuming a perpetual inventory system and using the weighted average method, determine (a) the weighted average unit cost after the July 23 purchase, (b) the cost of the merchandise sold on July 26, and (c) the inventory on July 31.arrow_forwardData on the physical inventory of Katus Products Co. as of December 31 follow: Quantity and cost data from the last purchases invoice of the year and the next-to-the-last purchases invoice are summarized as follows: Instructions Determine the inventory at cost as well as at the lower of cost or market, using the first-in, first-out method. Record the appropriate unit costs on the inventory sheet and complete the pricing of the inventory. When there are two different unit costs applicable to an item: 1. Draw a line through the quantity and insert the quantity and unit cost of the last purchase. 2. On the following line, insert the quantity and unit cost of the next-to-the-last purchase. 3. Total the cost and market columns and insert the lower of the two totals in the LCM column. The first item on the inventory sheet has been completed as an example.arrow_forward
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