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Chapter 6: 7SE_2 (page 359)
Question:Refer to Short Exercises S6-4 through S6-6. After completing those exercises, answer the following questions:
Requirements
2. Which inventory costing method produced the highest cost of goods sold?
The highest cost of goods sold is produced by the LIFO method.
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Question:The periodic inventory records of Flexon Prosthetics indicate the following for the month of July:
Jul. 1 Beginning merchandise inventory 6 units @ \( 60 each
8 Purchase 5 units @ \) 67 each
15 Purchase 10 units @ \( 70 each
26 Purchase 5 units @ \) 85 each
At July 31, Flexon counts four units of merchandise inventory on hand.
Compute ending merchandise inventory and cost of goods sold for Flexon using theFIFO inventory costing method.
Right Now Electronic Center began October with 100 units of merchandise inventory that cost \(70 each. During October, the store made the following purchases:
Oct. 3 35 units @ \) 82 each
12 45 units @ \( 84 each
18 75 units @ \) 90 each
Right Now uses the periodic inventory system, and the physical count at October 31indicates that 130 units of merchandise inventory are on hand.
Requirements
2. Net sales revenue for October totaled $26,000. Compute Right Now鈥檚 gross profitfor October using each method.
Fit Gym began January with merchandise inventory of 78 crates of vitamins that cost a total of \(4,290. During the month, Fit Gym purchased and sold merchandise on account as follows:
Jan. 5 Purchase 156 crates @ \) 64 each
13 Sale 180 crates @ \( 100 each
18 Purchase 114 crates @ \) 75 each
26 Sale 150 crates @ $ 116 each
Requirements
4. If the business wanted to pay the least amount of income taxes possible, which method would it choose?
Some of L and K Electronics鈥檚 merchandise is gathering dust. It is now December 31, 2018, and the current replacement cost of the ending merchandise inventory is\(32,000 below the business鈥檚 cost of the goods, which was \)98,000. Before any adjustmentsat the end of the period, the company鈥檚 Cost of Goods Sold account has a balanceof $410,000.
Requirements
2. At what amount should the company report merchandise inventory on the balancesheet?
During periods of rising costs, which inventory costing method produces the highest gross profit?
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