Measuring and Reporting Inventories Practice Problems
Complete the practice problems. Check your answers after you finish.
Demonstration problem
Demonstration problem A
Following are data related to Adler Company's beginning inventory, purchases, and sales:
|
Beginning Inventory and Purchases |
Sales |
|||
|
Units |
|
Unit Cost |
|
Units |
|
Beginning inventory 6,250 |
@ |
$3.00 |
February 3 |
5,250 |
|
March 15 5,000 |
@ |
3.12 |
May 4 |
4,500 |
|
May 10 8,750 |
@ |
3.30 |
September 16 |
8,000 |
|
August 12 6,250 |
@ |
3.48 |
October 9 |
7,250 |
|
November 20 3,750 |
@ |
3.72 |
|
|
|
30,000 |
|
|
|
25,000 |
a. Compute the ending inventory under each of the following methods:
Specific identification (assume ending inventory is taken equally from the August 12 and November 20 purchases).
FIFO: (a) Assume use of perpetual inventory procedure.
(b) Assume use of periodic inventory procedure.
LIFO: (a) Assume use of perpetual inventory procedure.
(b) Assume use of periodic inventory procedure.
Weighted-average: (a) Assume use of perpetual inventory procedure.
(b) Assume use of periodic inventory procedure.
(Carry unit cost to four decimal places and round total cost to nearest dollar.)
b. Give the journal entries to record the individual purchases and sales (Cost of Goods Sold entry
only) under the LIFO method and perpetual procedure.
Demonstration problem B
a. Joel Company reported annual net income as follows:
2007.... USD 27,200
2008.... USD 28,400 2009.... USD 24,000
Analysis of the inventories shows that certain clerical errors were made with the following results:
|
|
Incorrect inventory amount |
Correct inventory amount |
|
2007 December 31 |
$4,800 |
$5,680 |
|
2008 December 31 |
5,600 |
4,680 |
What is the corrected net income for 2007, 2008, and 2009?
b. The records of Little Corporation show the following account balances on the day a fire destroyed
the company's inventory:
Merchandise inventory, January 1 USD 40,000
Net cost of purchases (to date) USD 200,000
Sales (to date) USD 300,000
Average rate of gross margin for the past five years 30 per cent of net sales.
Compute an estimated value of the ending inventory using the gross margin method. c. The records of Draper Company show the following account balances at year-end:
|
|
Cost |
Retail |
|
Merchandise inventory, January 1 |
$17,600 |
$25,000 |
|
Purchases |
68,000 |
100,000 |
|
Transportation-in |
1,900 |
|
|
Sales |
|
101,000 |
Compute the estimated ending inventory at cost using the retail inventory method.
Source: Textbook Equity, https://learn.saylor.org/pluginfile.php/41219/mod_resource/content/3/AccountingPrinciples.pdf
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