Chapter 5: 5-4PSB_1 (page 270)
Refer to the information in Problem 5-3B and assume the periodic inventory system is used.
Required
Compute cost of goods available for sale and the number of units available for sale.
There is a total of680 units available for sale costing$249,300.
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Refer to the information in Exercise 5-3 and assume the periodic inventory system is used. Determine the costs assigned to ending inventory and to cost of goods sold using (a) specific identification, (b) weighted average, (c) FIFO, and (d) LIFO. (Round per unit costs and inventory amounts to cents.) For specific identification, ending inventory consists of 200 units, where 180 are from the January 30 purchase, 5 are from the January 20 purchase, and 15 are from beginning inventory.
Oingo Equipment Co. wants to prepare interim financial statements for the first quarter. The company wishes to avoid making a physical count of inventory. Otingo’s gross profit rate averages 35%. The following information for the first quarter is available from its records.
January 1, Beginning inventory | $802,880 |
Cost of goods purchased | 2,209,636 |
Sales | 3,760,260 |
Sales return | 79,300 |
Required
Use the gross profit method to estimate the company’s first-quarter ending inventory.
Question: Comparative figures for Apple and Microsoft follow
| \( million | Apple | Microsoft | ||||
| Current year | One year Prior | Two years prior | Current year | One year Prior | Two years prior | |
Inventory | \)2,349 | \(2,111 | \)1,764 | \(2,902 | \)2,660 | $1,938 |
Cost of Sales | 140,089 | 112,258 | 106,606 | 33,038 | 27,078 | 20,385 |
Required
Compute days’ sales in inventory for each company for the three years shown.
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
Analysis Component
5. If the company’s manager earns a bonus based on a percent of gross profit, which method of inventory costing will the manager likely prefer?
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:
Is the action by Golf Challenge’s owner ethical? Explain.
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