Chapter 5: 10DQ (page 259)
What is the meaning of market as it is used in determining the lower of cost or market for inventory?
Market in LCM method of inventory valuationrefers to the market value of the inventory.
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Refer to the information in Problem 5-3A and assume the periodic inventory system is used.
Required
1. Compute the cost of goods available for sale and the number of units available for sale.
Question: Part B
Selected accounts and balances for the three months ended March 31, 2018, for Business Solutions follow:
January 1, Beginning Inventory | $0 |
Cost of goods sold | 14,052 |
March 31, Ending Inventory | 704 |
Required
1. Compute inventory turnover and days’ sales in inventory for the three months ended March 31, 2018.
2. Assess the company’s performance if competitors average 15 times for inventory turnover and 25 days for days’ sales in inventory.
Refer to the information in Exercise 5-7 and assume the periodic inventory system is used. Determine the costs assigned to ending inventory and to cost of goods sold using (a) FIFO and (b) LIFO. Then (c) compute the gross margin for each method.
A company reports the following beginning inventory and two purchases for the month of January. On January 26, the company sells 350 units. Ending inventory at January 31 totals 150 units.
Units | Unit Cost | |
Beginning Inventory on Jan 1 | 320 | $3.00 |
Purchase on Jan 9 | 80 | 3.20 |
Purchase on Jan 25 | 100 | 3.34 |
Required
Assume the perpetual inventory system is used and then determine the costs assigned to ending inventory when costs are assigned based on the FIFO method. (Round per unit costs and inventory amounts to cents.)
If costs are declining, will the LIFO or FIFO method of inventory valuation yield the lower cost of goods sold? Why?
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