Chapter 5: 2PSA_2 (page 266)
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.
There are240 units in the ending inventory.
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Why are incidental costs sometimes ignored in inventory costing? Under what accounting constraint is this permitted?
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
Compute the number of units in ending inventory.
Use the data and results from Exercise 5-5 to prepare comparative income statements for the month of January for the company similar to those shown in Exhibit 5.8 for the four inventory methods. Assume expenses are $1,250, and that the applicable income tax rate is 40%. (Round amounts to cents.)
Required
3. If costs were rising instead of falling, which method would yield the highest net income?
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.
Use the data in Exercise 5-3 to prepare comparative income statements for the month of January for Laker Company similar to those shown in Exhibit 5.8 for the four inventory methods. Assume expenses are $1,250, and that the applicable income tax rate is 40%. (Round amounts to cents.)
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