Exercise Set A

LO 10.1Calculate the goods available for sale for Atlantis Company, in units and in dollar amounts, given the following facts about their inventory for the period:

LO 10.1E Company accepts goods on consignment from R Company and also purchases goods from S Company during the current month. E Company plans to sell the merchandise to customers during the following month. In each of these independent situations, who owns the merchandise at the end of the current month and should therefore include it in their company’s ending inventory? Choose E, R, or S.

1. Goods ordered from R, delivered and displayed on E’s showroom floor at the end of the current month.
2. Goods ordered from S, in transit, with shipping terms FOB destination.
3. Goods ordered from R, in transit, with no stated shipping terms.
4. Goods ordered from S, delivered and displayed on E’s showroom floor at the end of the current month, with shipping terms FOB destination.
5. Goods ordered from S, in transit, with shipping terms FOB shipping point.

LO 10.1The following information is taken from a company’s records. Applying the lower-of-cost-or-market approach, what is the correct value that should be reported on the balance sheet for the inventory?

LO 10.2Complete the missing piece of information involving the changes in inventory, and their relationship to goods available for sale, for the two years shown:

LO 10.2Akira Company had the following transactions for the month.

Calculate the ending inventory dollar value for the period for each of the following cost allocation methods, using periodic inventory updating. Provide your calculations.

1. first-in, first-out (FIFO)
2. last-in, first-out (LIFO)
3. weighted average (AVG)

LO 10.2Akira Company had the following transactions for the month.

Calculate the gross margin for the period for each of the following cost allocation methods, using periodic inventory updating. Assume that all units were sold for $25 each. Provide your calculations.

1. first-in, first-out (FIFO)
2. last-in, first-out (LIFO)
3. weighted average (AVG)

LO 10.2Prepare journal entries to record the following transactions, assuming periodic inventory updating and first-in, first-out (FIFO) cost allocation.

LO 10.3Calculate the cost of goods sold dollar value for A65 Company for the month, considering the following transactions under three different cost allocation methods and using perpetual inventory updating. Provide calculations for first-in, first-out (FIFO).

LO 10.3Calculate the cost of goods sold dollar value for A66 Company for the month, considering the following transactions under three different cost allocation methods and using perpetual inventory updating. Provide calculations for last-in, first-out (LIFO).

LO 10.3Calculate the cost of goods sold dollar value for A67 Company for the month, considering the following transactions under three different cost allocation methods and using perpetual inventory updating. Provide calculations for weighted average (AVG).

LO 10.3Prepare journal entries to record the following transactions, assuming perpetual inventory updating and first-in, first-out (FIFO) cost allocation. Assume no beginning inventory.

LO 10.3Prepare Journal entries to record the following transactions, assuming perpetual inventory updating, and last-in, first-out (LIFO) cost allocation. Assume no beginning inventory.

LO 10.4If a group of inventory items costing $15,000 had been omitted from the year-end inventory count, what impact would the error have on the following inventory calculations? Indicate the effect (and amount) as either (a) none, (b) understated $______, or (c) overstated $______.

LO 10.4If Wakowski Company’s ending inventory was actually $86,000 but was adjusted at year end to a balance of $68,000 in error, what would be the impact on the presentation of the balance sheet and income statement for the year that the error occurred, if any?

LO 10.4Shetland Company reported net income on the year-end financial statements of $125,000. However, errors in inventory were discovered after the reports were issued. If inventory was understated by $15,000, how much net income did the company actually earn?

LO 10.5Compute Altoona Company’s (a) inventory turnover ratio and (b) number of days’ sales in inventory ratio, using the following information.

LO 10.5Complete the missing pieces of McCarthy Company’s inventory calculations and ratios.