Bundle: Accounting, 27th + Cengagenowv2, 2 Terms Printed Access Card
27th Edition
ISBN: 9781337587419
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Textbook Question
Chapter 7, Problem 7.4CP
Communication
Golden Eagle Company began operations on April 1 by selling a single product. Data on purchases and sales for the year are as follows:
| Sales | ||
| April | 16,000 units | |
| May | 16,000 | |
| June | 20,000 | |
| July | 24,000 | |
| August | 28,000 | |
| September | 28,000 | |
| October | 18,000 | |
| November | 10,000 | |
| December | 8,000 | |
| Total units | 168,000 | |
| Total sales | $10,000,000 |
The president of the company, Connie Kilmer, has asked for your advice on which inventory cost flow method should be used for the 32,000-unit physical inventory that was taken on December 31. The company plans to expand its product line in the future and uses the periodic inventory system.
Write a brief memo to Ms. Kilmer comparing and contrasting the LIFO and FIFO inventory cost flow methods and their potential impacts on the company’s financial statements.
Expert Solution & Answer
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Kiwi Ltd. started April with 90 units in inventory costing $16 each. Kiwi Ltd., which uses a perpetual inventory system, had the following inventory transactions in April:
Purchases
Sales
Units Unit Cost
Units
Selling Price/Unit
4
Purchase
300 18
12
Sale
240
$32
21
Purchase
100 24
29
Sale
165
$35
Instructions
Using the FIFO cost formula, calculate the cost of goods sold for the month ended April
Show calculations in the table below.
Using the average cost formula, calculate the ending inventory at April 30. Show calculations in the table on the next page. Round to two decimals for all calculations. Use the ROUNDED values in your calculations.
(a)
Perpetual Inventory Record––FIFO
PURCHASES
COST OF GOODS SOLD
INVENTORY ON HAND
DA
TE…
Jailbird Company provided the following data about the
inventory for the month of January:
Units
Unit cost
Total cost
Jan. 1 Beginning
5 Purchase
10 Sale
15 Purchase
16 Purchase return
25 Sale
26 Sale return
31 Purchase
140
150
2,240,000
600,000
16,000
4,000
15,000
20,000
1,000
8,000
4,000
30,000
160
160
3,200,000
160,000
150
4,50,000
What is the moving average cost of the inventory on
January 31?
a. 7,625,000
b. 7,500,000
c. 7,690,000
d. 7,530,000
Morgenstern Ltd. has the following units and costs for the month of April.
1. Beginning inventory, April 1, 1,000 units at $20 (Cost)
2. Purchase 1, April 9, 1,200 units at $23 (cost)
3. Sold, April 12, 2,100 units at $40 (Retail)
4. Purchase 2, April 22, 800 units at $25 (Cost)
If Morgenstern uses a perpetual inventory system, what is the cost of ending inventory under weighted average at April 30? (Note: Use
four decimal places for per-unit calculations and round to the nearest dollar.)
Oa. $20,280
Ob. $22,164
Oc. $$45,436
Od. $47,320
Chapter 7 Solutions
Bundle: Accounting, 27th + Cengagenowv2, 2 Terms Printed Access Card
Ch. 7 - Prob. 1DQCh. 7 - Why is it important to take a physical inventory...Ch. 7 - Do the terms FIFO, LIFO, and weighted average...Ch. 7 - If merchandise inventory is being valued at cost...Ch. 7 - Which of the three methods of inventory...Ch. 7 - If inventory is being valued at cost and the price...Ch. 7 - Using the following data, how should the...Ch. 7 - The inventory at the end of the year was...Ch. 7 - Hutch Co. sold merchandise to Bibbins Company on...Ch. 7 - A manufacturer shipped merchandise to a retailer...
Ch. 7 - Cost flow methods The following three identical...Ch. 7 - Cost flow methods The following three identical...Ch. 7 - Perpetual inventory using FIFO Beginning...Ch. 7 - Perpetual inventory using FIFO Beginning...Ch. 7 - Perpetual inventory using LIFO Beginning...Ch. 7 - Perpetual inventory using LIFO Beginning...Ch. 7 - Perpetual inventory using weighted average...Ch. 7 - Perpetual inventory using weighted average...Ch. 7 - Periodic inventory using FIFO, LIFO, and weighted...Ch. 7 - Periodic inventory using FIFO, LIFO, and weighted...Ch. 7 - Lower-of-cost-or-market method On the basis of the...Ch. 7 - Lower-of-cost-or-market method On the basis of the...Ch. 7 - Effect of inventory errors During the taking of...Ch. 7 - Effect of inventory errors During the taking of...Ch. 7 - Inventory turnover and days sales in inventory...Ch. 7 - Inventory turnover and days sales in inventory...Ch. 7 - Control of inventories Triple Creek Hardware Store...Ch. 7 - Control of inventories Hardcase Luggage Shop is a...Ch. 7 - Perpetual inventory using FIFO Beginning...Ch. 7 - Perpetual inventory using LIFO Assume that the...Ch. 7 - Perpetual inventory using LIFO Beginning...Ch. 7 - Perpetual inventory using FIFO Assume that the...Ch. 7 - FIFO and LIFO costs under perpetual inventory...Ch. 7 - Weighted average cost flow method under perpetual...Ch. 7 - Weighted average cost flow method under perpetual...Ch. 7 - Perpetual inventory using FIFO Assume that the...Ch. 7 - Perpetual inventory using LIFO Assume that the...Ch. 7 - Periodic inventory by three methods The units of...Ch. 7 - Periodic inventory by three methods; cost of...Ch. 7 - Comparing inventory methods Assume that a firm...Ch. 7 - Lower-of-cost-or-market inventory On the basis of...Ch. 7 - Merchandise inventory on the balance sheet Based...Ch. 7 - Effect of errors in physical inventory Missouri...Ch. 7 - Effect of errors in physical inventory Fonda...Ch. 7 - Error in inventory During 20Y5, the accountant...Ch. 7 - Inventory turnover The following data (in...Ch. 7 - Prob. 7.21EXCh. 7 - Retail method A business using the retail method...Ch. 7 - Retail method A business using the retail method...Ch. 7 - Retail method A business using the retail method...Ch. 7 - Retail method On the basis of the following data,...Ch. 7 - Gross profit method The merchandise inventory was...Ch. 7 - Gross profit method Based on the following data,...Ch. 7 - Gross profit method Based on the following data,...Ch. 7 - FIFO perpetual inventory The beginning inventory...Ch. 7 - LIFO perpetual inventory The beginning inventory...Ch. 7 - Weighted average cost method with perpetual...Ch. 7 - Periodic inventory by three methods The beginning...Ch. 7 - Periodic inventory by three methods Dymac...Ch. 7 - Lower-of-cost-or-market inventory Data on the...Ch. 7 - Retail method; gross profit method Selected data...Ch. 7 - FIFO perpetual inventory The beginning inventory...Ch. 7 - LIFO perpetual inventory The beginning inventory...Ch. 7 - Weighted average cost method with perpetual...Ch. 7 - Periodic inventory by three methods The beginning...Ch. 7 - Periodic inventory by three methods Pappas...Ch. 7 - Lower-of-cost-or-market inventory Data on the...Ch. 7 - Retail method; gross profit method Selected data...Ch. 7 - Ethics in Action Sizemo Elektroniks sells...Ch. 7 - Prob. 7.2CPCh. 7 - Communication Golden Eagle Company began...Ch. 7 - LIFO and inventory flows The following is an...Ch. 7 - Comparing inventory ratios for two companies...Ch. 7 - Comparing inventory ratios for three companies The...
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