Chapter 5: 11DQ (page 259)
What guidance does the accounting constraint of conservatism offer?
The constraint of conservatism guides that abusiness entity must provide accurate figures without over and understatement.
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Martinez Company’s ending inventory includes the following items. Compute the lower of cost or market for ending inventory applied separately to each product.
Product | Unit | Cost per unit | Market per unit |
Helmet | 24 | \(50 | \)54 |
Bat | 17 | 78 | 72 |
Shoes | 38 | 95 | 91 |
Uniforms | 42 | 36 | 36 |
Seneca Co. began year 2017 with 6,500 units of product in its January 1 inventory costing \(35 each. It made successive purchases of its product in year 2017 as follows. The company uses a periodic inventory system. On December 31, 2017, a physical count reveals that 8,500 units of its product remain in inventory.
Jan 4 | 11,500 units @ \)33 each |
May 18 | 13,400 units @ \(32 each |
July 9 | 11,000 units @ \)29 each |
Nov 21 | 7,600 units @ $27 each |
Required
1. Compute the number and total cost of the units available for sale in year 2017.
Refer to the information in Problem 5-1A and assume the periodic inventory system is used. Required
2. Compute the number of units in ending inventory.
Trey Monson starts a merchandising business on December 1 and enters into the following three inventory purchases. Also, on December 15, Monson sells 15 units for \(20 each.
Purchased on December 7 | 10 units @ \)6 |
Purchased on December 14 | 20 units @ \(12 |
Purchased on December 21 | 15 units @ \)14 |
Required
Monson uses a perpetual inventory system. Determine the costs assigned to the December 31 ending inventory based on the FIFO method. (Round per unit costs and inventory amounts to cents.)
Montoure Company uses a perpetual inventory system. It entered into the following calendar-year purchases and sales transactions. (For specific identification, units sold consist of 600 units from beginning inventory, 300 from the February 10 purchase, 200 from the March 13 purchase, 50 from the August 21 purchase, and 250 from the September 5 purchase.)
Date | Activities | Units acquired at cost | Units sold at retail |
Jan 1 | Beginning inventory | 600 units @ \(45.00 per unit | |
Feb 10 | Purchases | 400 units @ \)42.00 per unit | |
March 13 | Purchases | 200 units @ \(27.00 per unit | |
March 15 | Sales | 800 units @ \)75.00 per unit | |
Aug 21 | Purchases | 100 units @ \(50.00 per unit | |
Sep 5 | Purchases | 500 units @ \)46.00 per unit | |
Sep 10 | Sales | 600 units @ $75.00 per unit | |
Total | 1,800 units | 1,400 units |
Required
3. Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification. (Round all amounts to cents.)
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