Chapter 5: 7DQ (page 259)
Does the accounting concept of consistency preclude any changes from one accounting method to another?
No, the accountingconcept of consistency does not preclude changes from one accounting method to another.
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What factors contribute to (or cause) inventory shrinkage?
Walberg Associates, antique dealers, purchased the contents of an estate for \(75,000. Terms of the purchase were FOB shipping point, and the cost of transporting the goods to Walberg Associates’s warehouse was \)2,400. Walberg Associates insured the shipment at a cost of \(300. Prior to putting the goods up for sale, they cleaned and refurbished them at a cost of \)980. Determine the cost of the inventory acquired from the estate.
A physical inventory of Liverpool Company taken at December 31 reveals the following.
Item | Units | Cost per unit | Market per unit |
Car audio equipment | |||
Speaker | 345 | \(90 | \)98 |
Stereos | 260 | 111 | 100 |
Amplifiers | 326 | 86 | 95 |
Subwoofers | 204 | 52 | 41 |
Security equipment | |||
Alarms | 480 | 150 | 125 |
Locks | 291 | 93 | 84 |
Cameras | 212 | 310 | 322 |
Binocular equipment | |||
Tripods | 185 | 70 | 84 |
Stabilizers | 170 | 97 | 105 |
Required
Compute the lower of cost or market for the inventory applied separately to each item.
Describe how costs flow from inventory to cost of goods sold for the following methods: (a) FIFO and (b) LIFO.
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 cost of goods available for sale and the number of units available for sale.
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