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Chapter 6: 12RQ (page 357)
When does an inventory error cancel out, and why?
Inventory error is cancelled out after two periods due to the opposite effects of the inventory error for the current period and the upcoming period.
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Question:Assume that Toys Galore store bought and sold a line of dolls during December as follows:
Dec. 1 Beginning merchandise inventory 13 units @ \( 9 each
8 Sale 8 units @ \) 22 each
14 Purchase 16 units @ \( 14 each
21 Sale 14 units @ \) 22 each
Requirements
1. Compute the cost of goods sold, cost of ending merchandise inventory, and grossprofit using the FIFO inventory costing method.
Question:Refer to Short Exercises S6-4 through S6-6. After completing those exercises, answer the following questions:
Requirements
3. If costs had been declining instead of rising, which inventory costing methodwould have produced the highest cost of goods sold?
Steel It began January with 55 units of iron inventory that cost \(35 each. During January, the company completed the following inventory transactions:
Units Unit Cost Unit Sales Price
Jan. 3 Sale 45 \) 83
8 Purchase 75 $ 52
21 Sale 70 85
30 Purchase 10 55
Requirements
6. If the business wanted to maximize gross profit, which method would it select?
Question:Boston Cycles started October with 12 bicycles that cost \(42 each. On October 16, Boston bought 40 bicycles at \)68 each. On October 31, Boston sold 34 bicycles for\(100 each.
Requirements
1. Prepare Boston Cycle鈥檚 perpetual inventory record assuming the company usesthe specific identification inventory costing method. Assume that Boston sold 10bicycles that cost \)42 each and 24 bicycles that cost $68 each.
Question:New York Pool Supplies鈥檚 merchandise inventory data for the year ended December 31, 2019, follow:
Net Sales Revenue\( 58,000
Cost of Goods Sold:
Beginning Merchandise Inventory\) 4,900
Net Cost of Purchases 32,500
Cost of Goods Available for Sale37,400
Less: Ending Merchandise Inventory 4,700
Cost of Goods Sold32,700
Gross Profit $ 25,300
Requirements
2. How would the inventory error affect New York Pool Supplies鈥檚 cost of goodssold and gross profit for the year ended December 31, 2020, if the error is not correctedin 2019?
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