Chapter 5: 5QS (page 260)
Refer to the information in QS 5-4 and assume the perpetual inventory system is used. Determine the costs assigned to ending inventory when costs are assigned based on LIFO. (Round per unit costs and inventory amounts to cents.)
Ending Inventory equals$450.
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Wattan Company reports beginning inventory of 10 units at \(60 each. Every week for four weeks it purchases an additional 10 units at respective costs of \)61, \(62, \)65, and $70 per unit for weeks 1 through 4.
Compute the cost of goods available for sale and the units available for sale for this four-week period. Assume that no sales occur during those four weeks.
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?
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.)
Question: Part A
Santana Rey of Business Solutions is evaluating her inventory to determine whether it must be adjusted based on lower of cost or market rules. Business Solutions has three different types of software in its inventory, and the following information is available for each.
Inventory Item | Units | Cost Per unit | Market per unit |
Office Productivity | 3 | \(76 | \)74 |
Desktop publishing | 2 | 103 | 100 |
Accounting | 3 | 90 | 96 |
Required
1. Compute the lower of cost or market for ending inventory assuming Rey applies the lower of cost or market rule to inventory as a whole. Must Rey adjust the reported inventory value? Explain.
2. Assume that Rey had instead applied the lower cost or market rule to each product in inventory. Under this assumption, must Rey adjust the reported inventory value? Explain.
Ames Trading Co. has the following products in its ending inventory. Compute lower of cost or market for inventory applied separately to each product.
Product | Quantity | Cost per unit | Market per unit |
Mountain bikes | 11 | \(600 | \)550 |
Skate Boards | 13 | 350 | 425 |
Gliders | 23 | 800 | 700 |
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