Chapter 5: Question 18QS_2 (page 261)
Identify the inventory costing method best described by each of the following separate statements. Assume a period of increasing costs.
_____2. Results in a balance sheet inventory amount approximating replacement cost.
FIFO method.
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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.
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.)
Refer to the information in Problem 5-1A and assume the periodic inventory system is used. Required
1. Compute cost of goods available for sale and the number of units available for sale.
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.
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.
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