Chapter 5: Q15DQ (page 259)
Refer to Apple’s financial statements in Appendix A and compute its cost of goods available for sale for the year ended September 26, 2015.
The business entity has a$142,438 cost of goods available for sale.
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Laker Company reported the following January purchases and sales data for its only product.
Date | Activities | Units acquired at cost | Units sold at retail |
Jan 1 | Beginning Inventory | 140 units @ \(6 = \)840 | |
Jan 10 | Sales | 100 units @ \(15 | |
Jan 20 | Purchases | 60 units @ \)5 = 300 | |
Jan 25 | Sales | 80 units @ \(15 | |
Jan 30 | Purchases | 180 units @ \)4.50 = 810 | |
Total | 380 units for $1,950 | 180 units |
Required
The company uses a perpetual inventory system. Determine the cost 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.
Refer to the information in QS 5-10 and assume the perpetual inventory system is used. Determine the costs assigned to ending inventory when costs are assigned based on the LIFO method. (Round per unit costs and inventory amounts to cents.)
Aloha Company uses a perpetual inventory system. It entered into the following calendar-year purchases and sales transactions. (For specific identification, the May 9 sale consisted of 80 units from beginning inventory and 100 units from the May 6 purchase; the May 30 sale consisted of 200 units from the May 6 purchase and 100 units from the May 25 purchase.)
Date | Activities | Units acquired at cost | Units sold at retail |
May 1 | Beginning inventory | 150 units @ \(300.00 per unit | |
May 6 | Purchase | 350 units @ \)350.00 per unit | |
May 9 | Sales | 180 units @ \(1,200.00 per unit | |
May 17 | Purchase | 80 units @ \)450.00 per unit | |
May 25 | Purchase | 100 units @ \(458.00 per unit | |
May 30 | Sales | 300 units @ \)1,400.00 per unit | |
680 units | 480 units |
Required
1. Compute 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:
Is the action by Golf Challenge’s owner ethical? Explain.
Refer to the information in Problem 5-3A and assume the periodic inventory system is used
Required
Analysis Component
5. If the company’s manager earns a bonus based on a percentage of gross profit, which method of inventory costing will the manager likely prefer?
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