Chapter Review
7-9ePractice Exercises
Cost Flow Methods
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EE 7-1 The following three identical units of Item Alpha are purchased during April:
Assume that one unit is sold on April 30 for $132.
Determine the gross profit for April and ending inventory on April 30 using the (a) first-in, first-out (FIFO); (b) last-in, first-out (LIFO); and (c) weighted average cost methods.
Cost Flow Methods
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EE 7-1 The following three identical units of Item B are purchased during June:
Assume that one unit is sold on June 27 for $270.
Determine the gross profit for June and ending inventory on June 30 using the (a) first-in, first-out (FIFO); (b) last-in, first-out (LIFO); and (c) weighted average cost methods.
Perpetual Inventory Using FIFO
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EE 7-2 Beginning inventory, purchases, and sales for Item Copper are as follows:
Mar. 1 Inventory 450 units at $7 9 Sale 390 units 13 Purchase 410 units at $8 25 Sale 340 units Assuming a perpetual inventory system and using the first-in, first-out (FIFO) method, determine (a) the cost of merchandise sold on March 25 and (b) the inventory on March 31.
Perpetual Inventory Using FIFO
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EE 7-2 Beginning inventory, purchases, and sales for Item Doodad are as follows:
July 1 Inventory 90 units at $21 7 Sale 79 units 15 Purchase 160 units at $24 24 Sale 70 units Assuming a perpetual inventory system and using the first-in, first-out (FIFO) method, determine (a) the cost of merchandise sold on July 24 and (b) the inventory on July 31.
Perpetual Inventory Using LIFO
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EE 7-3 Beginning inventory, purchases, and sales for Item FK7 are as follows:
Sept. 1 Inventory 115 units at $255 10 Sale 100 units 18 Purchase 110 units at $260 27 Sale 105 units Assuming a perpetual inventory system and using the last-in, first-out (LIFO) method, determine (a) the cost of merchandise sold on September 27 and (b) the inventory on September 30.
Perpetual Inventory Using LIFO
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EE 7-3 Beginning inventory, purchases, and sales for Item GY9 are as follows:
Mar. 1 Inventory 365 units at $24 8 Sale 305 units 15 Purchase 510 units at $26 27 Sale 325 units Assuming a perpetual inventory system and using the last-in, first-out (LIFO) method, determine (a) the cost of merchandise sold on March 27 and (b) the inventory on March 31.
Perpetual Inventory Using Weighted Average
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EE 7-4 Beginning inventory, purchases, and sales for H76 are as follows:
July 1 Inventory 300 units at $120 12 Sale 210 units 23 Purchase 360 units at $135 26 Sale 330 units Assuming a perpetual inventory system and using the weighted average method, determine (a) the weighted average unit cost after the July 23 purchase, (b) the cost of the merchandise sold on July 26, and (c) the inventory on July 31.
Perpetual Inventory Using Weighted Average
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EE 7-4 Beginning inventory, purchases, and sales for J101 are as follows:
Oct. 1 Inventory 480 units at $14 13 Sale 280 units 22 Purchase 600 units at $16 29 Sale 450 units Assuming a perpetual inventory system and using the weighted average method, determine (a) the weighted average unit cost after the October 22 purchase, (b) the cost of the merchandise sold on October 29, and (c) the inventory on October 31.
Periodic Inventory Using FIFO, LIFO, and Weighted Average Cost Methods
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EE 7-5 The units of an item available for sale during the year were as follows:
There are 17 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost using (a) the first-in, first-out (FIFO) method; (b) the last-in, first-out (LIFO) method; and (c) the weighted average cost method.
Periodic Inventory Using FIFO, LIFO, and Weighted Average Cost Methods
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EE 7-5 The units of an item available for sale during the year were as follows:
There are 73 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost using (a) the first-in, first-out (FIFO) method; (b) the last-in, first-out (LIFO) method; and (c) the weighted average cost method.
Lower-of-Cost-or-Market Method
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EE 7-6 On the basis of the following data, determine the value of the inventory at the lower of cost or market. Apply lower of cost or market to each inventory item, as shown in Exhibit 9.
Item Inventory Quantity Cost per Unit Market Value per Unit (Net Realizable Value) Raven 10 1,700 $163 $159 Dove 23 9,200 24 30
Lower-of-Cost-or-Market Method
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EE 7-6 On the basis of the following data, determine the value of the inventory at the lower of cost or market. Apply lower of cost or market to each inventory item, as shown in Exhibit 9.
Item Inventory Quantity Cost per Unit Market Value per Unit (Net Realizable Value) JFW1 5,750 $ 9 $10 SAW9 1,040 27 24
Effect of Inventory Errors
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EE 7-7 During the taking of its physical inventory on August 31, 20Y7, Robin Interiors Company incorrectly counted its inventory as $543,500 instead of the correct amount of $560,700. Indicate the effect of the misstatement on Robin Interiors’ August 31, 20Y7, balance sheet and income statement for the year ended August 31, 20Y7.
Effect of Inventory Errors
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EE 7-7 During the taking of its physical inventory on December 31, 20Y7, Combine Engine Company incorrectly counted its inventory as $274,100 instead of the correct amount of $270,700. Indicate the effect of the misstatement on Combine Engine’s December 31, 20Y7, balance sheet and income statement for the year ended December 31, 20Y7.
Inventory Turnover and Days’ Sales in Inventory
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EE 7-8 Financial statement data for years ending December 31 for Amsterdam Company follow:
20Y4 20Y3 Cost of merchandise sold $3,598,900 $3,015,630 Inventories: Beginning of year 593,000 589,600 End of year 648,000 593,000 -
Determine the inventory turnover for 20Y4 and 20Y3. Round to one decimal place.
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Determine the days’ sales in inventory for 20Y4 and 20Y3. Use 365 days and round to one decimal place.
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Does the change in the inventory turnover and the days’ sales in inventory from 20Y3 to 20Y4 indicate a favorable or an unfavorable trend?
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EE 7-8 Financial statement data for years ending December 31 for Salsa Company follow:
20Y7 20Y6 Cost of merchandise sold $2,912,700 $3,009,790 Inventories: Beginning of year 489,000 481,900 End of year 533,000 489,000 -
Determine the inventory turnover for 20Y7 and 20Y6. Round to one decimal place.
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Determine the days’ sales in inventory for 20Y7 and 20Y6. Use 365 days and round to one decimal place.
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Does the change in the inventory turnover and the days’ sales in inventory from 20Y6 to 20Y7 indicate a favorable or an unfavorable trend?
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