Chapter 6: Reporting and Analyzing Inventory (Math)

Dobler Company uses a periodic inventory system. Details for the inventory account for the month of January are as follows: Units - Per unit price - Total Balance, Jan. 1 200 $5.00 $1,000 Purchase, Jan. 15 100 $5.30 $530 Purchase, Jan. 28 100 $5.50 $550 An end of January, inventory showed that 160 units were on hand. If the company uses FIFO and sells the units for $10 each, what is the gross profit for the month?

$1,188 - Sales Revenue = 240 units x $10 = $2,400 - Inventory sold in units = 200 + 100 + 100 - 160 = 240 units - CGS using FIFO = (200 x $5) + (40 x $5.30) = $1,212 - Gross profit = Sales revenue - cgs = $2,400 - 1,212 = $1,188

A company uses the LIFO to measure ending inventory and cost of goods sold. It reported $1,000 of beginning inventory and $1,300 of ending inventory using LIFO. It also reports a LIFO reserve of $100 at the end of the year. The company operates in an inflationary environment. If the company used FIFO instead of LIFO, its ending inventory would be

$1,400 - FIFO ending inventory = LIFO ending + ending LIFO reserve

A company uses the LIFO to measure ending inventory and cost of goods sold. It reported $1,000 of beginning inventory and $1,200 of ending inventory using LIFO. It also reports a LIFO reserve of $300 at the end of the year. The company operates in an inflationary environment. If the company used FIFO instead of LIFO, its ending inventory would be

$1,500 FIFO ending inventory = LIFO ending inventory + ending LIFO reserve = 1,200 + 300 = $1,500

Sweet Company has the following inventory data: July 1 Beginning inventory 30 units at $120 per unit 5 Purchases 180 units at $112 per unit 21 Purchases 90 units at $115 per unit The company sold 204 units. Assuming that a periodic inventory system is used, what is the amount allocated to ending inventory on a LIFO basis?

$10,992 -Goods available for sale = 30 + 180 + 90 = 300 units The company sold 204 Ending inventory = 96 units - Using LIFO and periodic, ending inventory includes the 96 oldest units. - Ending inventory = (30 x $120) + (66 x $112) = $10,992

Parrish Company has the following inventory units and costs: Number of units - Cost per unit Beg. inventory, Jan. 1 - 9,000 - $11 Purchase, June 19 - 12,000 - $12 Purchase, Nov. 8 - 6,000 - $13 If 11,000 units are on hand at December 31, what is the cost of the ending inventory under FIFO using a periodic inventory system?

$138,000 -Ending inventory under FIFO uses the most recent costs of inventory to compute ending inventory - Ending inventory = (6,000 x $13) + (5,000 x $12) = $138,000

East Jenkins Company developed the following information about its inventories in applying the lower-of-cost-or-market (LCM) basis in valuing inventories: Category - Cost - Market A $57,000 $45,000 B 45,000 35,000 C 70,000 82,000 If East Jenkins applies the LCM basis, the value of the inventory reported on the balance sheet would be

$150,000 - 45,000 + 35,000 + 70,000 = $150,000

Sweet Company has the following inventory data: July 1 Beginning inventory 25 units at $205 per unit 5 Purchases 120 units at $220 per unit 21 Purchases 60 units at $215 per unit The company sold 120 units. Assuming that a periodic inventory system is used, what is the cost of goods sold on a LIFO basis?

$26,100 - Goods available for sale = 25 + 120 + 60 = 205 - The company sold 120 units - Ending inventory = 85 units (205 - 120) - Using LIFO & periodic, the cgs includes the newest 120 units Cost of goods sold = (60 x $215) + (60 x $220) = $26,100

At December 31, Moore Company's inventory records indicated a balance of $360,000. Upon further investigation it was determined that this amount included the following: (1) $56,000 in inventory purchases made by Moore shipped from the seller December 28 terms FOB shipping point, but not due to be received until January 2. (2) $24,000 in inventory purchases made by Moore shipped from the seller December 28 terms FOB destination, but not due to be received until January 3. (3) $8,000 in goods sold by Moore with terms FOB destination on December 28. The goods are not expected to reach their destination until January 4. (4) $9,000 in goods sold by Moore with terms FOB shipping point on December 28. The goods are not expected to reach their destination until January 5. (5) $13,000 of goods owned by Moore Company held on consignment by Dollywood Company. What is Moore's correct ending inventory balance at December 31?

$327,000 - Do not include FOB destination purchases not yet received (24,000), FOB shipping point goods sold and shipped (9,000), and Goods held on consignment (N/A) - Ending inventory = $360,000 - 24,000 - 9,000 = $327,000

At December 31, Moore Company's inventory records indicated a balance of $400,000. Upon further investigation it was determined that this amount included the following: (1) $56,000 in inventory purchases made by Moore shipped from the seller December 27 terms FOB shipping point, but not due to be received until January 3. (2) $23,000 in inventory purchases made by Moore shipped from the seller December 27 terms FOB destination, but not due to be received until January 2. (3) $6,000 in goods sold by Moore with terms FOB destination on December 27. The goods are not expected to reach their destination until January 6. (4) $8,000 in goods sold by Moore with terms FOB shipping point on December 27. The goods are not expected to reach their destination until January 4. (5) $13,000 of goods received on consignment from Dollywood Company. What is Moore's correct ending inventory balance at December 31?

$356,000 - $400,000 - 23,000 - 8,000 - 13,000 = $356,000

Salt Company has the following inventory data: Nov. 1 Inventory 30 units @ $4.00 each 8 Purchase 120 units @ $4.30 each 17 Purchase 60 units @ $4.20 each 25 Purchase 90 units @ $4.40 each A physical count of merchandise inventory on November 30 reveals that there are 100 units on hand. Ending inventory under FIFO and a periodic inventory system is

$438 - Goods available = 300 Ending inventory = 100 units - Cost of goods sold = goods available for sale - ending inventory = 300 - 100 = 200 units - Using FIFO and periodic, ending inventory includes the 100 newest units. - Ending inventory = (90 units x $4.40) + (10 units x $4.20) = $438

At December 31, Sunrise Company's inventory records indicated a balance of $654,000. Upon further investigation it was determined that this amount included the following: (1) $68,000 of inventory sold and shipped by Sunrise on December 28 under the terms FOB destination, and this inventory was received by the buyer on January 6. (2) $98,000 of inventory purchased by Sunrise under the terms FOB destination, and this $98,000 of inventory did not arrive until January 2. (3) $4,000 of inventory held by Sunrise on consignment from another company. (4) $34,000 of inventory consigned to a third-party consignor that it continues to hold at the end of the year. What is Sunrise's correct ending inventory balance at December 31?

$552,000 - $654,000 - $98,000 - $4,000 = $552,000

Cost of goods purchased is $500,000, beginning inventory is $20,000, and cost of goods sold is $460,000. How much is ending inventory?

$60,000 -Cost of goods sold = beginning + purchases - ending inventory - Endings = 20,000 + 500,000 - 460,000 = 60,000

Freehan Company's accounting records has the following information about its inventory: Units - Unit Cost Inventory, Jan. 1: 5,000 $8 Purchase, April 2 15,000 $10 Purchase, Aug. 28 20,000 $12 If the company has 7,000 units on hand at December 31, how much is the cost of ending inventory under the average-cost method in a periodic inventory system?

$75,250 - Average cost per unit = [(5,000 x $8) + (15,000 x $10) + 20,000 x $12)] / (5,000 + 15,000 + 20,000) = 430,000 430,000 / 40,000 units = $10.75 per unit - Ending inventory = $10.75 x 7,000 units = $75,250

Cost of goods purchased is $500,000, ending inventory is $20,000, and cost of goods sold is $560,000. How much is beginning inventory?

$80,000 -Cost of goods sold = Beginning inventory + Purchases - Ending inventory -Beginning inventory + 500,000 - 20,000 = 56,000 = 80,000

Haggerty Industries had the following inventory transactions: Units - Cost per unit Feb. 1 Beginning balance 30 $1.00 Feb. 14 Purchase 60 $1.05 Feb. 21 Purchase 40 $1.10 Feb. 28 Purchase 50 $1.12 The company sold 100 units at $2.00 per unit. Assuming that a periodic inventory system is used, what is the company's gross profit using LIFO? (rounded to whole dollars)

$89.50 - Sales = (100 x $2) = $200 - Cost of goods sold = (50 x $1.12) + (40 x $1.10) + (10 x $1.05) = $56 + 44 + 10.50 = $110.50 - Gross profit = $200 - 110.50 = $89.50

Net sales are $2,000,000, cost of goods sold is $960,000, and average inventory is $30,000. How many days' sales are in inventory?

11.4 - Inventory turnover = $960,000/$30,000 = 32 times Days' sales in inventory = 365/32 = 11.4 days