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Chapter 6: 3SE_1 (page 358)

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.

Short Answer

Expert verified

The total cost of goods sold based on specific identification amounts to$2,052.

Step by step solution

01

Specific identification method

The specific identification method is an inventory costing method that estimates the inventory cost based on the particular units of inventory. This inventory method is used for unique inventory items such as jewelry, real estate, etc.

02

Perpetual inventory record based on the specific identification method

Date

Purchase / Opening inventory

Sale

Balance

Unit

Cost

Amount

Unit

Cost

Amount

Unit

Cost

Amount

Oct 1

12

$42

$1,806

12

$42

$1,806

Oct 16

40

$68

$2,720

12

40

$42

$68

$4,526

Oct 31

10

24

$42

$68

$2,052

2

16

$42

$68

$1,172

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Most popular questions from this chapter

How is inventory turnover calculated, and what does it measure?

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.

Preparing a perpetual inventory record and journal entries鈥擣IFO

Requirements

2. Journalize the October 16 purchase of merchandise inventory on the account and theOctober 31 sale of merchandise inventory on the account.

Assume that AB Tire Store completed the following perpetual inventory transactions for a line of tires:

May 1 Beginning merchandise inventory 16 tires @ \( 65 each

11 Purchase 10 tires @ \) 78 each

23 Sale 12 tires @ \( 88 each

26 Purchase 14 tires @ \) 80 each

29 Sale 18 tires @ $ 88 each

Requirements

1. Compute cost of goods sold and gross profit using the FIFO inventory costing method.

Question:Antique Carpets鈥檚 books show the following data. In early 2020, auditors found that the ending merchandise inventory for 2017 was understated by \(8,000 and that theending merchandise inventory for 2019 was overstated by \)9,000. The ending merchandiseinventory at December 31, 2018, was correct.

2019

2018

2017

Net Sales Revenue

\( 212,000

\) 161,000

\( 170,000

Cost of Goods Sold:

Beginning Merchandise Inventory

\)22,000

\(28,000

\)41,000

Net cost of purchase

131,000

100,000

86,000

Cost of goods available for sale

153,000

128,000

127,000

Less: Ending Merchandise Inventory

34,000

22,000

28,000

Cost of goods sold

119,000

106,000

99,000

Gross Profit

93,000

55,000

71,000

Operating Expenses

63,000

28,000

39,000

Net Income

\( 30,000

\) 27,000

$ 32,000

Requirements

1. Prepare corrected income statements for the three years.
2. State whether each year鈥檚 net income鈥攂efore your corrections鈥攊s understated oroverstated, and indicate the amount of the understatement or overstatement.

3. Compute the inventory turnover and days鈥� sales in inventory using the correctedincome statements for the three years. (Round all numbers to two decimals.)

Question:Super Mart, a regional convenience store chain, maintains milk inventory by the gallon.

The first month鈥檚 milk purchases and sales at its Freeport, Florida, location follow:

Nov. 2 Purchased 11 gallons @ \(2.15 each

6 Purchased 2 gallons @ \)2.80 each

8 Sold 6 gallons of milk to a customer

13 Purchased 3 gallons @ $2.85 each

14 Sold 4 gallons of milk to a customer

Requirements

2. Determine the amount that would be reported in ending merchandise inventoryon November 15 using the LIFO inventory costing method
See all solutions

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