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Chapter 6: Q34PGB_1 (page 370)

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

1. Prepare a perpetual inventory record for the merchandise inventory using theFIFO inventory costing method.

Short Answer

Expert verified

The ending inventory under the FIFO method comes out to be $1,330.

Step by step solution

01

FIFO Method

FIFO method follows the first-in-first-out sequence to compute the cost of issued inventory. So for every issued unit, its cost is matched with the earliest purchased inventory assuming that the inventory would have been issued in a first-in-first-out manner.

02

Perpetual inventory table under the FIFO method

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Most popular questions from this chapter

Which principle states that businesses should use the same accounting methods and procedures from period to period?

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.

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

3. Determine the amount that would be reported in ending merchandise inventoryon November 15 using the weighted-average inventory costing method. Round allamounts to the nearest cent.

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

2019

2018

2017

Net Sales Revenue

\( 220,000

\) 162,000

\( 176,000

Cost of Goods Sold:

Beginning Merchandise Inventory

\)22,000

\(29,000

\)46,000

Net cost of purchase

132,000

90,000

76,000

Cost of goods available for sale

154,000

119,000

122,000

Less: Ending Merchandise Inventory

32,000

22,000

29,000

Cost of goods sold

122,000

97,000

93,000

Gross Profit

98,000

65,000

83,000

Operating Expenses

72,000

38,000

48,000

Net Income

\( 26,000

\) 27,000

$ 35,000

Requirements

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.

Question:This problem continues the Canyon Canoe Company situation from Chapter 5. At the beginning of the January 2019, Canyon Canoe Company decided to carry and sellT-shirts with its logo printed on them. Canyon Canoe Company uses the perpetualinventory system to account for the inventory. During February 2019, Canyon CanoeCompany completed the following merchandising transactions:

Feb. 2 Sold 60 T-shirts at \(10 each.

5 Purchased 50 T-shirts at \)6 each.

7 Sold 45 T-shirts for \(10 each.

8 Sold 20 T-shirts for \)10 each.

10 Canyon Canoe Company realized the inventory was running

low, so it placed a rush order and purchased 20 T-shirts. The

premium cost for these shirts was \(7 each.

12 Placed a second rush order and purchased 40 T-shirts at \)7

each.

13 Sold 20 T-shirts for \(10 each.

15 Purchased 50 T-shirts for \)6 each.

20 In order to avoid future rush orders, purchased 150 T-shirts.

Due to the volume of the order, Canyon Canoe Company

was able to negotiate a cost of \(5 each.

21 Sold 40 T-shirts for \)10 each.

22 Sold 35 T-shirts for \(10 each.

24 Sold 20 T-shirts for \)10 each.

25 Sold 45 T-shirts for \(10 each.

27 Sold 40 T-shirts for \)10 each.

Requirements

1. Assume Canton Canoe Company began February with 94 T-shirts in inventorythat cost $5 each. Prepare the perpetual inventory records for February using theFIFO inventory costing method.
See all solutions

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