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Assignment: CH7 HOMEWORK 1.

Perpetual Inventory Using FIFO

Beginning inventory, purchases, and sales data for portable DVD players are as follows:

The business maintains a perpetual inventory system, costing by the firstin, firstout method.

a. Determine the cost of the merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 3. Under FIFO, if units are in inventory at two different costs, enter the

units with the LOWER unit cost first in the Cost of Merchandise Sold Unit Cost column and in the Inventory Unit Cost column.

Cost of the Merchandise Sold Schedule

Firstin, Firstout Method

Portable DVD Players

Date Quantity Purchased Purchases Unit Cost Purchases Total Cost Quantity Sold Cost of Merchandise Sold Unit Cost Cost of Merchandise Sold Total Cost Inventory

April 1 120

April 6 $ $

April 14 $ $

April 19

April 25

April 30

Balances $

b. Based upon the preceding data, would you expect the inventory to be higher or lower using the lastin, firstout method?

_________________

Perpetual Inventory Using LIFO

Beginning inventory, purchases, and sales data for portable DVD players are as follows:

The business maintains a perpetual inventory system, costing by the lastin, firstout method.

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Determine the cost of merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 4. Under LIFO, if units are in inventory at two different costs, enter the units

with the HIGHER unit cost first in the Cost of Merchandise Sold Unit Cost column and LOWER unit cost first in the Inventory Unit Cost column.

Schedule of Cost of Merchandise Sold

LIFO Method

Portable DVD Players

Date Quantity Purchased Purchases Unit Cost Purchases Total Cost Quantity Sold Cost of Merchandise Sold Unit Cost Cost of Merchandise Sold Total Cost Inventory Quantity

Apr. 1 120

Apr. 6 $ $

Apr. 14 $ $

Apr. 19

Apr. 25

Apr. 30

Apr. 30 Balances $

Perpetual Inventory Using LIFO

Beginning inventory, purchases, and sales data for prepaid cell phones for August are as follows:

a. Assuming that the perpetual inventory system is used, costing by the LIFO method, determine the cost of merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated

in Exhibit 4. Under LIFO, if units are in inventory at two different costs, enter the units with the HIGHER unit cost first in the Cost of Merchandise Sold Unit Cost column and LOWER unit cost first in the Inventory Unit Cost

column.

Schedule of Cost of Merchandise Sold

LIFO Method

Prepaid Cell Phones

Date Quantity Purchased Purchases Unit Cost Purchases Total Cost Quantity Sold Cost of Merchandise Sold Unit Cost Cost of Merchandise Sold Total Cost Inventory Quantity

Aug. 1

Aug.10 $ $

Aug. 12 $ $

Aug. 14

Aug. 20

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Aug. 31

Aug. 31 Balances $

b. Based upon the preceding data, would you expect the inventory to be higher or lower using the firstin, firstout method?

_________________

FIFO and LIFO Costs Under Perpetual Inventory System

The following units of a particular item were available for sale during the year:

The firm uses the perpetual inventory system, and there are 52 units of the item on hand at the end of the year.

a. What is the total cost of the ending inventory according to FIFO?

$ _________________

b. What is the total cost of the ending inventory according to LIFO?

$ _________________

Periodic Inventory by Three Methods

The units of an item available for sale during the year were as follows:

There are 32 units of the item in the physical inventory at December 31. The periodic inventory system is used.

a. Determine the inventory cost by the firstin, firstout method.

$ _________________

b. Determine the inventory cost by the lastin, firstout method.

$ _________________

c. Determine the inventory cost by the weighted average cost method.

$ _________________

Periodic Inventory by Three Methods; Cost of Merchandise Sold

The units of an item available for sale during the year were as follows:

There are 48 units of the item in the physical inventory at December 31. The periodic inventory system is used.

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Determine the inventory cost and the cost of merchandise sold by three methods.

Cost of Merchandise Inventory and Cost of Merchandise Sold

Inventory Method Merchandise Inventory Merchandise Sold

Firstin, firstout (FIFO) $ $

Lastin, firstout (LIFO)

Weighted average cost

Effect of Errors in Physical Inventory

Yellowstone River Supply Co. sells canoes, kayaks, whitewater rafts, and other boating supplies. During the taking of its physical inventory on December 31, 2014, Yellowstone

River Supply incorrectly counted its inventory as $324,650 instead of the correct amount of $338,500.

Enter all amounts as positive numbers.

a. State the effect of the error on the December 31, 2014, balance sheet of Yellowstone River Supply.

Balance Sheet Items Understated / Overstated Amount

Merchandise Inventory _________________ $ _________________

Current Assets _________________ $ _________________

Total Assets _________________ $ _________________

Owner's Equity _________________ $ _________________

b. State the effect of the error on the income statement of Yellowstone River Supply for the year ended December 31, 2014.

Income Statement Items Overstated / Understated Amount

Cost of Merchandise Sold _________________ $ _________________

Gross Profit _________________ $ _________________

Net Income _________________ $ _________________

c. If uncorrected, what would be the effect of the error on the 2015 income statement?

Income Statement Items Overstated / Understated Amount

Cost of Merchandise Sold _________________ $ _________________

Gross Profit _________________ $ _________________

Net Income _________________ $ _________________

Inventory Turnover and Number of Days' Sales in Inventory

Kroger, Safeway Inc., and WinnDixie Stores Inc. are three grocery chains in the United States. Inventory management is an important aspect of the grocery retail business.

Recent balance sheets for these three companies indicated the following merchandise inventory information:

The cost of goods sold for each company was:

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a. Determine the number of days' sales in inventory and the inventory turnover for the three companies. Assume 365 days a year. Round all interim calculations to one

decimal place. For number of days' sales in inventory, round final answers to the nearest day, and for inventory turnover, round to one decimal place.

Company names Number of Days' Sales in Inventory Inventory Turnover

Kroger _________________ days _________________

Safeway _________________ days _________________

WinnDixie _________________ days _________________

b. If WinnDixie had Kroger's number of days' sales in inventory, how much additional cash flow would have been generated from the smaller inventory relative to its actual

average inventory position? Round interim calculations to one decimal place and your final answer to the nearest million.

$ _________________ million

FIFO Perpetual Inventory

The beginning inventory at RTE Office Supplies and data on purchases and sales for a threemonth period ending August 31, 2014, are as follows:

Required:

1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory record similar to the one illustrated in Exhibit 3, using the firstin, firstout method. Under FIFO, if units are in inventory at

two different costs, enter the units with the LOWER unit cost first in the Cost of Merchandise Sold Unit Cost column and in the Inventory Unit Cost column. Round unit cost to two decimal places, if necessary.

RTE Office Supplies

Schedule of Cost of Merchandise Sold

FIFO Method

For the three months ended August 31, 2014

Purchases Cost of Merchandise Sold

Date Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost Quantity

June

_________________

June

_________________

June

_________________

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June

_________________

July

_________________

July

_________________

July

_________________

July

_________________

Aug.

_________________

Aug.

_________________

Aug.

_________________

Aug.

_________________

Aug.

Balances $

_________________

2. Determine the total sales and the total cost of merchandise sold for the period. Journalize the entries in the sales and cost of merchandise sold accounts. Assume that all sales were on account.

Record

sale

_________________ _________________

Record

cost

_________________ _________________

3. Determine the gross profit from sales for the period.

$ _________________

4. Determine the ending inventory cost as of August 31, 2014.

$ _________________

5. Based upon the preceding data, would you expect the inventory using the lastin, firstout method to be higher or lower?

_________________

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10.

LIFO Perpetual Inventory

The beginning inventory at RTE Office Supplies and data on purchases and sales for a threemonth period are as follows:

Required:

1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory record similar to the one illustrated in Exhibit 4, using the lastin, firstout method. Under LIFO, if units are in inventory at two

different costs, enter the units with the HIGHER unit cost first in the Cost of Merchandise Sold Unit Cost column and LOWER unit cost first in the Inventory Unit Cost column. Round unit cost to two decimal places, if

necessary.

RTE Office Supplies

Schedule of Cost of Merchandise Sold

LIFO Method

For the three months ended August 31, 2014

Purchases Cost of Merchandise Sold

Date Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost Quantity

June

_________________

June

_________________

June

_________________

June

_________________

July

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5 _________________

_________________

July

_________________

July

_________________

July.

_________________

Aug.

_________________

Aug.

_________________

Aug.

_________________

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_________________

Aug.

_________________

Aug.

Balances $

_________________

2. Determine the total sales, the total cost of merchandise sold, and the gross profit from sales for the period.

Total sales $ _________________

Total cost of merchandise sold $ _________________

Gross profit from sales $ _________________

3. Determine the ending inventory cost as of August 31, 2014.

$ _________________

11.

Periodic Inventory by Three Methods

The beginning inventory for RTE Office Supplies and data on purchases and sales for a threemonth period are as follows:

Required:

1. Determine the inventory on August 31, 2014, and the cost of goods sold for the threemonth period, using the firstin, firstout method and the periodic inventory system.

Merchandise inventory, August 31,

2014

$ _________________

Cost of merchandise sold $ _________________

2. Determine the inventory on August 31, 2014, and the cost of goods sold for the threemonth period, using the lastin, firstout method and the periodic inventory system.

Merchandise inventory, August 31,

2014

$ _________________

Cost of merchandise sold $ _________________

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3. Determine the inventory on August 31, 2014, and the cost of goods sold for the threemonth period, using the weighted average cost method and the periodic inventory

system. Round the weighted average unit cost to the nearest cent.

Merchandise inventory, August 31,

2014

$ _________________

Cost of merchandise sold $ _________________

4. Compare the gross profit and the August 31, 2014, inventories, using the following column headings. Enter all amounts as positive numbers.

FIFO LIFO Weighted Average

Sales $

_________________

Cost of merchandise

sold

_________________

Gross profit $

_________________

Inventory, August 31,

2014

_________________

12.

Periodic Inventory by Three Methods

Dymac Appliances uses the periodic inventory system. Details regarding the inventory of appliances at November 1, 2013, purchases invoices during the next 12 months, and

the inventory count at October 31, 2014, are summarized as follows:

Required:

1. Determine the cost of the inventory on October 31, 2014, by the firstin, firstout method.

If the inventory of a particular model comprises one entire purchase plus a portion of another purchase acquired at a different unit cost, use a separate line for each purchase.

If units are in inventory at two different costs, enter the units PURCHASED MOST RECENTLY first.

Dymac Appliances

Cost of the InventoryFIFO Method

October 31, 2014

Model Quantity Unit Cost Total Cost

A10

_________________

$ _________________

A10

_________________

B15 _________________

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_________________

B15

_________________

E60

_________________

G83

_________________

J34

_________________

M90

_________________

M90

_________________

Q70

_________________

Q70

_________________

Total $ _________________

2. Determine the cost of the inventory on October 31, 2014, by the lastin, firstout method.

If the inventory of a particular model comprises one entire purchase plus a portion of another purchase acquired at a different unit cost, use a separate line for each purchase.

If units are in inventory at two different costs, enter the OLDEST units first.

Dymac Appliances

Cost of the InventoryLIFO Method

October 31, 2014

Model Quantity Unit Cost Total Cost

A10

_________________

A10

_________________

B15

_________________

E60

_________________

E60

_________________

G83

_________________

G83

_________________

J34

_________________

J34

_________________

M90

_________________

M90

_________________

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M90

_________________

Q70

_________________

Q70

_________________

Total $

_________________

3. Determine the cost of the inventory on October 31, 2014, by the weighted average cost method.

Dymac Appliances

Cost of the InventoryWeighted Average Method

October 31, 2014

Model Quantity Unit Cost Total Cost

A10

_________________

$ _________________

B15

_________________

E60

_________________

G83

_________________

J34

_________________

M90

_________________

Q70

_________________

Total $ _________________

4. _________________ would be preferred for income tax purposes in periods of rising prices.