ac ch 7

Ruby Company sells office supplies. Below is a list of purchases and sales for the month of January: Date Inventory Balances Purchases January 1 Beginning inventory 10 @ $5 January 4 Purchase 35 @ $6 January 18 Purchase 35 @ $7 January 31 Ending inventory 25 units Ruby uses the FIFO cost flow assumption. Calculate its January cost of goods sold.

(10 units x $5) + (35 units x $6)+(35 units x $7) - (25 units x $7) = $330 for 55 units sold. To determine the # of units sold: 80 units were available for sale (10 + 35 + 35) and 25 were in ending inventory; thus, 55 units were sold during January.

Ruby Company sells office supplies. Below is a list of purchases and sales for the month of January: Date Inventory Balances Purchases January 1 Beginning inventory 5 @ $5 January 4 Purchase 40 @ $6 January 18 Purchase 40 @ $7 January 31 Ending inventory 25 units Ruby uses the LIFO cost flow assumption. Calculate its January cost of goods sold.

(40 units x $7) + (20 units x $6) = $400 for 60 units sold. To determine units sold: 85 units were available for sale (5 + 40 + 40) and 25 were in ending inventory so 60 units were sold during January.

Bradley Corporation began business on January 1. During January, Bradley reported the following: January 1 purchase: 85 units @ $9 = $ 765 January 10 purchase: 150 units @ $13 = $ 1950 January sales: 195 units Determine the amount of cost of goods sold under the FIFO cost flow assumption for the month of January.

195 units were sold. FIFO assigns to cost of goods sold the earliest inventory costs first: (85 units x $9) + ({bad} units x $13) = $2195 cost of goods sold. Or you could take cost of goods available for sale minus ending inventory cost assigned (LISH when FIFO) and the remainder would be the cost of goods sold.

Bradley Corporation began business on January 1. During January, Bradley reported the following: January 1 purchase: 80 units @ $8 = $ 640 January 10 purchase: 145 units @ $12 = $ 1740 January sales: 195 units Determine the amount of inventory to report on Bradley's balance sheet at January 31 under the LIFO cost flow assumption.

30 x $8 = $240 30 units in ending inventory (225 available - 195 sold) x $8 (first-in purchase cost)= $240. The name of the method describes the assignment of costs to the expense, cost of goods sold. So the reverse assignment is made for ending inventory. LIFO is first-in, still here for ending inventory.

Bradley Corporation began business on January 1. During January, Bradley reported the following: January 1 purchase: 85 units @ $9 = $ 765 January 10 purchase: 155 units @ $12 = $ 1860 January sales: 195 units Determine the amount of inventory to report on Bradley's balance sheet at January 31 under the FIFO cost flow assumption. Cost of inventory on Bradley's balance sheet at January 31

45 units in ending inventory ({amble} available - 195 sold) = # units remaining at the end of the period. # units remaining unsold x $12 (last-in purchase cost)= $540. The name of the method describes the assignment of costs to the expense, cost of goods sold. So the reverse assignment is made for ending inventory. FIFO is last-in, still here for ending inventory.

When prices (costs of inventory from suppliers) remain the same over the period, which cost flow assumption would generally measure the highest current ratio?

All of the above assumptions would result in equal current ratios during an extended period of constant prices.

Which one of the following companies would likely carry the largest percentage of inventory as compared to its other assets?

Automotive dealership

The following information comes from the annual reports of Devin Designs. 2017 2016 2015 Beginning inventory ? ? 2,250 Purchases 12,652 ? ? Goods available for sale ? ? 12,899 Ending inventory ? 2,662 ? Cost of goods sold 12,213 10,908 10,490 What is the Purchases amount for 2015?

Beginning inventory + Purchases = Cost of goods available for sale = Ending inventory + cost of goods sold. Purchases in 2015 = cost of goods available for sale - beginning inventory = 12,899 - 2,250 = 10,649 The correct answer is: $10,649

Beginning inventory is valued at $7100, purchases are $19500 and ending inventory is valued at $8700. What will be the cost of goods sold?

Beginning inventory 7100 + Purchases 19500 = 26600 cost of goods available for sale. $8700 of this amount was not sold and remains in ending inventory so $26600 - $8700 = $17900 of inventory was sold (cost of goods sold)

The following information comes from the annual reports of Devin Designs. 2018 2017 2016 Beginning inventory ? ? 2,250 Purchases 12,652 ? ? Goods available for sale ? ? 12,899 Ending inventory ? 2,662 ? Cost of goods sold 12,213 10,908 10,490 What is the cost of beginning inventory amount for 2018?

Beginning inventory for 2018 must be equal to ending inventory for 2017, which is given as $2,662. The correct answer is: $2,662

Warren Trading pays for its inventory purchases with cash. Beginning inventory is $2900, purchases were $19500, and cost of goods sold is $17600. Determine the cost of Warren's ending inventory.

Cost of goods available for sale - cost of goods sold = cost of goods yet not sold (that remain in inventory on the balance sheet at the end of the period). ($2900 beginning inventory + $19500 purchases) - $17600 cost of goods sold = $4800 ending inventory.

Grandma's Gift Store inventory and purchase information for July is as follows: July 1 Beginning inventory 515 @ $3 July 10 Purchase 785 @ $4 July 31 Ending inventory (units) 295 Grandma's Gift Store uses the FIFO cost flow assumption. Calculate its cost of goods sold for the month of July and its ending inventory at July 31. COGS: Ending Inventory:

Cost of goods sold (where 1005 were units sold = 1300 available - 295 in ending inventory) = (515 units x $3) + (490 units x $4) = $3505 Ending inventory = 295 units x $4 = $1180 (last-in, still-here for inventory using FIFO). Alternatively, cost of goods available for sale - cost of goods sold = $1180 cost of inventory on balance sheet as of July 31.

Grandma's Gift Store inventory and purchase information for July is as follows: July 1 Beginning inventory 515 @ $2 July 10 Purchase 805 @ $3 July 31 Ending inventory (units) 315 Grandma's Gift Store uses the LIFO cost flow assumption. Calculate its cost of goods sold for July and its ending inventory at July 31.

Cost of goods sold (where 1005 were units sold = 1320 available - 315 in ending inventory) = (805 units x $3) + (200 units x $2) = $2815 Ending inventory = 315 units x $2 = $630. Alternatively, $630 inventory on the balance sheet as of July 31 = cost of goods available for sale - cost of goods sold.

During a period of rising prices and inventories, a company whose current ratio is dangerously close to the minimum specified by agreement with a major creditor would prefer which cost flow assumption?

FIFO

During a year of increasing inventory costs per unit and increasing inventory quantities (ending inventory quantity higher than beginning inventory quantity), which cost flow assumption would report the highest net income?

FIFO

During a year of rising inventory cost per unit and increasing inventory quantity, which cost flow assumption would yield the highest current ratio?

FIFO

Which of the following inventory cost flow assumptions is not allowed under IFRS?

LIFO

Yogi Company began operations on July 1. Below is its July income statement and the current portion of its balance sheet dated July 31. Each unit is sold for $80. Under the LIFO method of inventory, Yogi reported the following: July 3 Purchased 60 units @ $50 $3000 July 14 Purchased 40 units @ $65 2600 Cost of goods available $5600 July 31 Inventory (15 @ $50) 750 Cost of goods sold $4850 Complete the following for Yogi for July using the FIFO cost flow assumption instead of LIFO.

Sales revenue = $80 X 85 = $6800 (FIFO) Cost of goods sold (85 units sold) = (60 units x $50) + ({bad} units x $65) = $4625 Gross profit = $6800 sales revenue - $4625 cost of goods sold = $2175

Summers Company began business on August 1, 2015. During August, Summers made the following purchases: August 3 115 units @ $9 $ 1035 August 21 305 units @ $20 6100 Other information provided: August sales 355 units at $50 each August expenses excluding cost of goods sold $7100 August 31 current assets excluding inventory $35700 August 31 current liabilities $25900 Calculate Summers' August 31 ending inventory under the FIFO and LIFO cost flow assumptions.

Solution: Where 65 units in ending inventory = 420 units available for sale - 355 units sold. Under FIFO, the cost of ending inventory will reflect a last-in, still here pattern. Under LIFO, the cost of ending inventory will reflect a first-in, still-here pattern of cost assignment. FIFO = 65 x $20 = $1300 LIFO = 65 x $9 = $585

Mars Hardware sold 20 drills for $8 each. Each drill cost $4. Which journal entry is required at the time of sale under a perpetual inventory system? Select one: + Cash 160 - Inventory 80 + Gain from Sale 80 Incorrect + Cash 160 + Sales 160 + Cash 160 - Inventory 160 + Cash 160 + Cost of Goods Sold 80 + Sales 160 - Inventory 80

There are two sides to this event: the sales revenue side that affects sales and cash (or accounts receivable if sold on account); the cost side that affects the expense account, cost of goods sold, and the asset, inventory. The difference between the selling price and the cost will be reported on the income statement in the calculation of gross profit. The correct answer is: + Cash 160 + Cost of Goods Sold 80 + Sales 160 - Inventory 80

Cinci Company began business on March 1. During March, Cinci made the following purchases. March 1: 90 units @ $8 $ 720 March 6: 145 units @ $13 1885 March sales: 185 units How much will Cinci report as cost of goods sold using LIFO during March?

Under LIFO, cost the 185 units that were sold by assigning more recent purchase costs to those units first: (145 units x $13) + (40 units x $8) = $2205

Items should be included in the company's inventory if they are:

being held for sale.

If a company uses the LIFO cost flow assumption on its federal income tax return in order to minimize its tax payment, then it:

must use LIFO on its financial statements.

If a company desires to increase its inventory level, then it should:

purchase more goods than it sells during the period.

During a period of changing inventory acquisition prices from suppliers, which of the following is NOT immediately sensitive to the particular cost flow assumption adopted?

quick ratio