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Chapter 5: 17QS (page 261)

Refer to the information in QS 5-10 and assume the periodic inventory system is used. Determine the costs assigned to ending inventory when costs are assigned based on specific identification. Of the units sold, eight are from the December 7 purchase and seven are from the December 14 purchase. (Round per unit costs and inventory amounts to cents.)

Short Answer

Expert verified

Ending Inventory totals$378.

Step by step solution

01

Definition of Specific Identification Method

The method of allocating the cost to ending inventory and the cost of goods sold by keeping close track of the inventory is known as specific identification. Under this method, each method is allocated with its particular acquisition cost.

02

Ending inventory under specific identification method

Particular

Units

X

Per unit

=

Total cost

December 7

2

X

6

=

$12

December 14

13

X

12

=

$156

December 21

15

X

14

=

$210

Total

$378

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Most popular questions from this chapter

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.

Where is the amount of merchandise inventory disclosed in the financial statements?

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: BTN 5-3 Golf Challenge Corp. is a retail sports store carrying golf apparel and equipment. The store is at the end of its second year of operation and is struggling. A major problem is that its cost of inventory has continually increased in the past two years. In the first year of operations, the store assigned inventory costs using LIFO. A loan agreement the store has with its bank, its prime source of financing, requires the store to maintain a certain profit margin and current ratio. The store’s owner is currently looking over Golf Challenge’s preliminary financial statements for its second year. The numbers are not favorable. The only way the store can meet the required financial ratios agreed on with the bank is to change from LIFO to FIFO. The store originally decided on LIFO because of its tax advantages. The owner recalculates ending inventory using FIFO and submits those numbers and statements to the loan officer at the bank for the required bank review. The owner thankfully reflects on the available latitude in choosing the inventory costing method.

Required:

How does Golf Challenge’s use of FIFO improve its net profit margin and current ratio?

The records of Macklin Co. provide the following information for the year ended December 31.

At cost

At Retail

January 1, Beginning Inventory

\(90,022

\)115,610

Cost of Goods Purchased

502,250

761,830

Sales

782,300

Sales Return

3,460

Required

A year-end physical inventory at retail prices yields a total inventory of $80,450. Prepare a calculation showing the company’s loss from shrinkage at cost and at retail.
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