Samuelson and Messenger (SAM) began 2021 with 240 units of its one product. These units were purchased near the end of 2020 for $25 each. During the month of January, 120 units were purchased on January 8 for $28 each and another 240 units were purchased on January 19 for $30 each. Sales of 150 units and 125 units were made on January 10 and January 25, respectively. There were 325 units on hand at the end of the month. SAM uses a periodic Inventory system. Required: 1. Calculate ending Inventory and cost of goods sold for January using FIFO. 2. Calculate ending Inventory and cost of goods sold for January using average cost.

Samuelson and Messenger (SAM) began 2021 with 240 units of its one product. These units were purchased near the end of 2020 for $25 each. During the month of January, 120 units were purchased on January 8 for $28 each and another 240 units were purchased on January 19 for $30 each. Sales of 150 units and 125 units were made on January 10 and January 25, respectively. There were 325 units on hand at the end of the month. SAM uses a periodic Inventory system. Required: 1. Calculate ending Inventory and cost of goods sold for January using FIFO. 2. Calculate ending Inventory and cost of goods sold for January using average cost.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter6: Cost Of Goods Sold And Inventory

Section: Chapter Questions

Problem 62E

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Dollar-Value LIFO A company adopted the LIFO method when its inventory was 1,800. One year later its ending inventory was 2,100, and costs had increased 5% during the year. Required: What is the ending inventory using dollar-value LIFO? Round to the nearest dollar.
Periodic inventory using FIFO, UFO, and weighted average cost methods The units of an item available for sale during the year were as follows: Jan. 1 Inventory 20 units at 360 7,200 Aug. 13 Purchase 260 units at 342 88,920 Nov. 30 Purchase 40 units at 357 14,280 Available for sale 320 units 110,400 There are 57 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost using the (A) first-in, first-out (FIFO) method; (B) last-in, first-out (LIFO) method; and (C) weighted average cost method.
(Appendix 8.1) Inventory Write-Down Frost Companys inventory records tor the years 2019 and 2020 reveal the cost and market of the January 1, 2019, inventory to be 125,000. On December 31, 2019, the cost of inventory was 130,000, while the market value was only 128,000. The December 31, 2020, market value of inventory was 140,000, and the cost was only 135,000. Frost uses a periodic inventory system. Purchases for 2019 were 100,000 and for 2020 were 110,000. Required: 1. Assume the inventory that existed at the end of 2019 was sold in 2020. Prepare the journal entries at the end of 2019 and 2020 to record the lower of cost or net realizable value under the (a) allowance method and (b) direct method. 2. Prepare the cost of goods sold section of the income statement and show how the company would record the inventory on its balance sheet for 2019 and 2020 under the (a) allowance method and (b) direct method. 3. Next Level Refer to your answer for P8-3. How does the use of a periodic inventory system versus a perpetual inventory system affect the valuation of inventory and the amount reported as income?
LIFO Liquidation Profit Hammond Company adopted LIFO when it was formed on January 1, 2017. Since then, the company has had the following purchases and sales of its single inventory item: In December 2020, the controller realized that because of an unexpected increase in demand, the company had sold 22,000 units but had purchased only 19,000 units during the year. In 2020, each unit had been sold for 19, and each unit purchased had cost 10. The income tax rate is 21%. Required: 1. Next Level If Hammond makes no additional purchases in 2020, how much LIFO liquidation profit will it report? 2. Prepare the appropriate annual report disclosures for 2020. 3. Next Level if Hammond purchases an additional 7,000 units in December 2020, how much income tax will the company save? 4. Next Level If Hammond purchases the additional 7,000 units, how much income tax has the company saved over the 4-year period by using LIFO instead of the FIFO cost flow assumption?
Lower-of-cost-or-market inventory Data on the physical inventory of Katus Products Co. as of December 31 follows: Description Inventory Quantity Market Value per Unit (Net Realizable Value) A54 37 56 C77 24 178 F66 30 132 H83 21 545 K12 375 5 Q58 90 18 S36 8 235 V97 140 20 Y88 17 744 Quantity and cost data from the last purchases invoice of the year and the next-to-the-last purchases invoice are summarized as follows: Description Last Purchases Invoice Next-to-the-Last Purchases Invoice Quantity Purchased Unit Cost Quantity Purchased Unit Cost A54 30 60 40 58 C77 25 174 15 180 F66 20 130 15 128 H83 6 547 15 540 K12 500 6 500 7 Q58 75 25 80 26 S36 5 256 4 260 V97 100 17 115 16 Y88 10 750 8 740 Instructions Determine the inventory at cost and also at the lower of cost or market, using the first-in, first-out method. Record the appropriate unit costs on the inventory sheet, and complete the pricing of the inventory. When there are two different unit costs applicable to an item, proceed as follows: 1. Draw a line through the quantity, and insert the quantity and unit cost of the last purchase. 2. On the following line, insert the quantity and unit cost of the next-to-the-last purchase. 3. Total the cost and market columns and insert the lower of the two totals in the LCM column. The first item on the inventory sheet has been completed as an example. Inventory Sheet December 31 Description Unit Inventory Quantity Cost per Unit Market Value per Unit(Net Realizable Value) Total Cost Market LCM A54 37 30 60 56 1,800 1,680 7 58 56 406 392 2,206 2,072 2,072
Perpetual inventory using FIFO Beginning inventory, purchases, and sales for Item Zeta9 are as follows: Oct. 1 Inventory 175 units at 30 7 Sale 155 units 15 Purchase 200 units at 33 24 Sale 140 units Assuming a perpetual inventory system and using the first-in, first-out (FIFO) method, determine (A) the cost of goods sold on October 24 and (B) the inventory on October 31.
Inventory Costing Methods On June 1, Welding Products Company had a beginning inventory of 210 cases of welding rods that had been purchased for S88 per case. Welding Products purchased 1,150 cases at a cost of $95 per case on June 3. On June 19, the company purchased another 950 cases at a cost of $112 per case. Sales data for the welding rods are: Welding Products uses a perpetual inventory system, and the sales price of the welding rods was $130 per case. Required: 1. Compute the cost of ending inventory and cost of goods sold using the FIFO method. 2. Compute the cost of ending inventory and cost of goods sold using the LIFO method. 3. Compute the cost of ending inventory and cost of goods sold using the average cost method. ( Note: Use four decimal places for per-unit calculations and round all other numbers to the nearest dollar.) 4. CONCEPTUAL CONNECTION Assume that operating expenses are $21,600 and Welding Products has a 30% tax rate. How much will the cash paid for income taxes differ among the three inventory methods? 5. CONCEPTUAL CONNECTION Compute Welding Products' gross profit ratio (rounded to two decimal places) and inventory turnover ratio (rounded to three decimal places) under each of the three inventory costing methods. How would the choice of inventory costing method affect these ratios?
Inventory Costing and LCM Ortman Enterprises sells a chemical used in various manufacturing processes. On January 1, 2019, Ortman had 5,000,000 gallons on hand, for which it had paid $0.50 per gallon. During 2019, Ortman made the following purchases: During 2019, Ortman sold 65 000,000 gallons at $0.75 per gallon (35,000,000 gallons were sold on June 29 and 30,000,000 gallons were sold on Nov. 22), leaving an ending inventory of 7,000,000 gallons. Assume that Ortman uses a perpetual inventory system. Ortman uses the lower of cost or market for its inventories, as required by generally accepted accounting principles. Required: 1. Assume that the market value of the chemical is $0.76 per gallon on December 31, 2019. Compute the cost of ending inventory using the FIFO and average cost methods, and then apply LCM. ( Note: Use four decimal places for per-unit calculations and round all other numbers to the nearest dollar.) 2. Assume that the market value of the chemical is $0.58 per gallon on December 31, 2019. Compute the cost of ending inventory using the FIFO and average cost methods, and then apply LCM. ( Note: Use four decimal places for per-unit calculations and round all other numbers to the nearest dollar.)