Financial statement data for years ending December 31 for Tango Company follow:

Financial statement data for years ending December 31 for Tango Company follow: 

20Y7 20Y6 Cost of merchandise sold $3,864,000 $4,001,500 Inventories:   Beginning of year 770,000 740,000 End of year 840,000 770,000

a. Determine the inventory turnover for 20Y7 and 20Y6.

b. Determine the days’ sales in inventory for 20Y7 and 20Y6. Use 365 days and round to one decimal place.

c. Does the change in inventory turnover and the days’ sales in inventory from 20Y6 to 20Y7 indicate a favorable or an unfavorable trend?

Answer:

a. Cost of merchandise sold Inventories: Beginning of year End of year Average inventory Inventory turnover b. Cost of merchandise sold Average daily cost of merchandise sold Average inventory Days’ sales in inventory Days’ Sales in Inventory ($3,864,000 ÷ 365 days) ($4,001,500 ÷ 365 days) $805,000 $755,000 [($770,000 + $840,000) ÷ 2] [($740,000 + $770,000) ÷ 2] ($805,000 ÷ $10,586.3) ($755,000 ÷ $10,963.0) c. The decrease in the inventory turnover from 5.3 to 4.8 and the increase in the days’ sales in inventory from 68.9 days to 76.0 days indicate unfavorable trends in managing inventory.

Financial statement data for years ending December 31 for Holland Company follow:

Financial statement data for years ending December 31 for Holland Company follow: 

20Y4 20Y3 Cost of merchandise sold $4,504,500 $3,715,200 Inventories: 

 Beginning of year 788,000 760,000  End of year 850,000 788,000

a. Determine the inventory turnover for 20Y4 and 20Y3. 

b. Determine the days’ sales in inventory for 20Y4 and 20Y3. Use 365 days and round to one decimal place.

c. Does the change in inventory turnover and the days’ sales in inventory from 20Y3 to 20Y4 indicate a favorable or an unfavorable trend?

Answer:

a. Cost of merchandise sold Inventories: Beginning of year End of year Average inventory Inventory turnover b. Cost of merchandise sold Average daily cost of merchandise sold Average inventory Days’ sales in inventory Days’ Sales in Inventory

20Y4 20Y3 $4,504,500 $3,715,200 Inventory Turnover 5.5 4.8 $788,000 $760,000 $850,000 $788,000 $819,000 $774,000 20Y4 20Y3 [($788,000 + $850,000) ÷ 2] [($760,000 + $788,000) ÷ 2] $12,341.1 $10,178.6 $4,504,500 $3,715,200 ($819,000 ÷ $12,341.1) ($774,000 ÷ $10,178.6) c. The increase in the inventory turnover from 4.8 to 5.5 and the decrease in the days’ sales in inventory from 76.0 days to 66.4 days indicate favorable trends in managing inventory.

During the taking of its physical inventory on December 31, 2019, Waterjet Bath Company incorrectly counted its inventory as $728,660

During the taking of its physical inventory on December 31, 2019, Waterjet Bath Company incorrectly counted its inventory as $728,660 instead of the correct amount of $719,880. 

Indicate the effect of the misstatement on Waterjet Bath’s December 31, 2019, balance sheet and income statement for the year ended December 31, 2019.

Answer:

Balance Sheet: Merchandise inventory overstated*........................ Current assets overstated.................................... Total assets overstated....................................... Owner’s equity overstated.................................... Income Statement: Cost of merchandise sold understated.................. Gross profit overstated....................................... Net income overstated.......................................... * $728,660 – $719,880 = $8,780 Amount of Misstatement Overstatement (Understatement) 8,780 $ 8,780 8,780

During the taking of its physical inventory on August 31, 2019, Kate Interiors Company incorrectly counted its inventory as $366,900

During the taking of its physical inventory on August 31, 2019, Kate Interiors Company incorrectly counted its inventory as $366,900 instead of the correct amount of $378,500. 

Indicate the effect of the misstatement on Kate Interiors’ August 31, 2019, balance sheet and income statement for the year ended August 31, 2019.

Answer:

Balance Sheet: Merchandise inventory understated*..................... Current assets understated.................................... Total assets understated....................................... Owner’s equity understated................................. Income Statement: Cost of merchandise sold overstated..................... Gross profit understated....................................... Net income understated....................................... * $378,500 – $366,900 = $11,600

On the basis of the following data, determine the value of the inventory at the lower of cost or market. Apply lower of cost or market to each inventory item

On the basis of the following data, determine the value of the inventory at the lower of cost or market. Apply lower of cost or market to each inventory item, as shown in Exhibit 9.

Item Inventory Quantity Cost per Unit Market Value per Unit (Net Realizable Value) JFW1 6,330 $10 $11 SAW9 1,140 36 34

Answer:

Market Value per Cost Unit (Net Inventory per Realizable Commodity Quantity Unit Value) Cost Market LCM JFW1 6,330 $10 $11 $ 63,300 $ 69,630 $ 63,300 SAW9 1,140 36 34 41,040 38,760 38,760 Total $104,340 $108,390 $102,060

On the basis of the following data, determine the value of the inventory at the lower of cost or market. Apply lower of cost or market to each inventory item

On the basis of the following data, determine the value of the inventory at the lower of cost or market. Apply lower of cost or market to each inventory item, as shown in Exhibit 9.

Item Inventory Quantity Cost per Unit Market Value per Unit (Net Realizable Value) Raven 10 1,200 $115 $112 Dove 23 6,500      17     22

Answer:

Market Value per Cost Unit (Net Inventory per Realizable Commodity Quantity Unit Value) Cost Market LCM Raven 10 1,200 $115 $112 $138,000 $134,400 $134,400 Dove 23 6,500 17 22 110,500 143,000 110,500 Total $248,500 $277,400 $244,900

The units of an item available for sale during the year were as follows: Jan. 1 Inventory 12 units at $5,400 $ 64,800

The units of an item available for sale during the year were as follows:

Jan.  1 Inventory 12 units at $5,400 $ 64,800

Aug.  7 Purchase 18 units at $6,000 108,000

Dec. 11 Purchase 15 units at $6,480 97,200

Available for sale 45 units $270,000

There are 14 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost using (a) the first-in, first-out (FIFO) method; (b) the last-in, first-out (LIFO) method; and (c) the weighted average cost method.

Answer:

a. First-in, first-out (FIFO) method: $90,720 = 14 units × $6,480

b. Last-in, first-out (LIFO) method: $76,800 = [(12 units × $5,400) + (2 units × $6,000)]

c. Weighted average cost method: $84,000 (14 units × $6,000), where average cost = $6,000 = $270,000 ÷ 45 units

The units of an item available for sale during the year were as follows: Jan. 1 Inventory 20 units at $360 $ 7,200

The units of an item available for sale during the year were as follows:

Jan.  1 Inventory  20 units at $360 $   7,200

Aug. 13 Purchase 260 units at $342 88,920

Nov. 30 Purchase  40 units at $357 14,280

Available for sale 320 units $110,400

There are 57 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost using (a) the first-in, first-out (FIFO) method; (b) the last-in, first-out (LIFO) method; and (c) the weighted average cost method.

Answer:

a. First-in, first-out (FIFO) method: $20,094 = (40 units × $357) + (17 units × $342)

b. Last-in, first-out (LIFO) method: $19,854 = (20 units × $360) + (37 units × $342)

c. Weighted average cost method: $19,665 (57 units × $345), where average cost = $345 = $110,400 ÷ 320 units

Beginning inventory, purchases, and sales for WCS12 are as follows: Oct. 1 Inventory 300 units at $8

Beginning inventory, purchases, and sales for WCS12 are as follows:

Oct.  1 Inventory 300 units at $8

13 Sale 175 units

22 Purchase 375 units at $10

29 Sale 280 units

Assuming a perpetual inventory system and using the weighted average method, determine (a) the weighted average unit cost after the October 22 purchase, (b) the cost of the merchandise sold on October 29, and (c) the inventory on October 31.

Answer:

a. Weighted average unit cost: $9.50 Inventory total cost after purchase on October 22: 125 units @ $8 $1,000 375 units @ $10 3,750 500 $4,750 Weighted average unit cost = $9.50 ($4,750 ÷ 500 units) b. Cost of merchandise sold (October 29): $2,660 (280 units × $9.50) c. Inventory, October 31: $2,090 (220 units × $9.50)

Beginning inventory, purchases, and sales for Meta-B1 are as follows: July 1 Inventory 100 units at $400

Beginning inventory, purchases, and sales for Meta-B1 are as follows:

July  1 Inventory 100 units at $400

12 Sale   70 units

23 Purchase 120 units at $450

26 Sale 110 units

Assuming a perpetual inventory system and using the weighted average method, determine (a) the weighted average unit cost after the July 23 purchase, (b) the cost of the merchandise sold on July 26, and (c) the inventory on July 31.

Answer:

a. Weighted average unit cost: $440 Inventory total cost after purchase on July 23: 30 units @ $400 $12,000 120 units @ $450 54,000 150 $66,000 Weighted average unit cost = $440.00 ($66,000 ÷ 150 units) b. Cost of merchandise sold (July 26): $48,400 (110 units × $440.00) c. Inventory, July 31: $17,600 (40 units @ $440.00)

Beginning inventory, purchases, and sales for Item Gidget are as follows: Sept. 1 Inventory 80 units at $175

Beginning inventory, purchases, and sales for Item Gidget are as follows:

Sept. 1 Inventory 80 units at $175

10 Sale 65 units

18 Purchase 75 units at $180

27 Sale 70 units

Assuming a perpetual inventory system and using the last-in, first-out (LIFO) method, determine (a) the cost of merchandise sold on September 27 and (b) the inventory on September 30.

Answer:

a. Cost of merchandise sold (September 27): $12,600 = (70 units × $180) b. Inventory, September 30: 15 units @ $175 $2,625 5 units @ $180 900 20 $3,525

Beginning inventory, purchases, and sales for Item Foxtrot are as follows: Mar. 1 Inventory 270 units at $18

Beginning inventory, purchases, and sales for Item Foxtrot are as follows:

Mar.  1 Inventory 270 units at $18

 8 Sale 225 units

15 Purchase 375 units at $20

27 Sale 240 units

Assuming a perpetual inventory system and using the last-in, first-out (LIFO) method, determine (a) the cost of merchandise sold on March 27 and (b) the inventory on March 31.

Answer:

a. Cost of merchandise sold (March 27): $4,800 = (240 units × $20)  b. Inventory, March 31: 45 units @ $18 $ 810 135 units @ $20 2,700 180 $3,510

Beginning inventory, purchases, and sales for Item Delta are as follows: July 1 Inventory 50 units at $15

Beginning inventory, purchases, and sales for Item Delta are as follows:

July  1 Inventory 50 units at $15

 7 Sale 44 units

15 Purchase 90 units at $18

24 Sale 40 units

Assuming a perpetual inventory system and using the first-in, first-out (FIFO) method, determine (a) the cost of merchandise sold on July 24 and (b) the inventory on July 31.

Answer:

a. Cost of merchandise sold (July 24): 6 units @ $15 $ 90 34 units @ $18 612 40 $702 b. Inventory, July 31: $1,008 = 56 units × $18

Beginning inventory, purchases, and sales for Item Widget are as follows: Mar. 1 Inventory 200 units at $8

Beginning inventory, purchases, and sales for Item Widget are as follows:

Mar.  1 Inventory 200 units at $8

 9 Sale 175 units

13 Purchase 160 units at 9

25 Sale 150 units

Assuming a perpetual inventory system and using the first-in, first-out (FIFO) method, determine (a) the cost of merchandise sold on March 25 and (b) the inventory on March 31.

Answer:

a. Cost of merchandise sold (March 25): 25 units @ $8 $ 200 125 units @ $9 1,125 150 $1,325 b. Inventory, March 31: $315 = 35 units × $9

The following three identical units of Item Beta are purchased during June:

The following three identical units of Item Beta are purchased during June:

Item Beta Units Cost

June  2 Purchase 1 $ 50

12 Purchase 1 60

23 Purchase 1 70

Total 3 $180

Average cost per unit $ 60 ($180 ÷ 3 units)

Assume that one unit is sold on June 27 for $110.

Determine the gross profit for June and ending inventory on June 30 using the (a) first-in, first-out (FIFO); (b) last-in, first-out (LIFO); and (c) weighted average cost methods.

Answer:

a. First-in, first-out (FIFO) b. Last-in, first-out (LIFO) c. Weighted average cost June June 30 Gross Profit Ending Inventory $50 ($110 – $60) $120 ($60 × 2)

The following three identical units of Item A are purchased during April:

The following three identical units of Item A are purchased during April:

Item A Units Cost

Apr.  2 Purchase 1 $ 68

14 Purchase 1 73

28 Purchase 1 75

Total 3 $216

Average cost per unit $ 72 ($216 ÷ 3 units)

Assume that one unit is sold on April 30 for $118.

Determine the gross profit for April and ending inventory on April 30 using the (a) first-in, first-out (FIFO); (b) last-in, first-out (LIFO); and (c) weighted average cost methods.

Answer:

a. First-in, first-out (FIFO) b. Last-in, first-out (LIFO) c. Weighted average cost Gross Profit April Ending Inventory April 30 $148 ($73 + $75)$50 ($118 – $68) $141 ($68 + $73) $144 ($72 × 2)