Smart Watch Company reported the following income statement data for a 2-year period.
Smat uses a periodic inventory system. The inventories at January 1, 2019, and December 31, 2020, are correct. However, the ending inventory at December 31, 2019, was overstated $6,000.
Instructions
- Prepare correct income statement data for the 2 years.
- What is the cumulative effect of the inventory error on total gross profit for the 2 years?
Freeze Frame Camera Shop uses the lower-of-cost-or-market basis for its inventory. The following data are available at December 31.
Instructions
Determine the amount of the ending inventory by applying the lower-of-cost-or-market basis
Charapata Company applied FIFO to its inventory and got the following results for its ending inventory.
| Cameras | 100 units at a cost per unit of $65 |
| Blu-ray players | 150 units at a cost per unit of $75 |
| iPods | 125 units at a cost per unit of $80 |
The cost of purchasing units at year-end was cameras $71, Blu-ray players $67, and iPods $78.
Instructions
Determine the amount of the ending inventory at lower-of-cost-or-market
This information is available for Abdullah's Photo Corporation for 2017, 2018, and 2019.
Instructions
Calculate inventory turnover, days in inventory, and gross profit rate for Abdullah's Photo corporation for 2018, 2019, and 2020. Comment on any trends.
The cost of goods sold computations for Sooner company and Later Company are shown as below
Instructions
- Compute inventory turnover and days in inventory for each company.
- Which company moves its inventory more quickly?
Ehrhart Appliance uses a perpetual inventory system. For its flat-screen television sets, the January 1 inventory was 3 sets at $600 each. On January 10, Ehrhart purchased 6 units at $660 each. The company sold 2 units on January 8 and 5 units on January 15.
Instructions
Compute the ending inventory under (a) FIFO, (b) LIFO and (c) Moving-average cost.
Moath company reports the following for the month of June.
Instructions
- Calculate the cost of the ending inventory and the cost of goods sold for each cost flow assumption, using a perpetual inventory system. Assume a sale of 440 unts occurred on June 5 for a selling price of $8 and a sale of 360 units on June 27 for $9.
- How do the results differ under (1) FIFO and (2) LIFO.
- Why the average unit cost not $6 [($5+$6+$7)/3]?
Information about Elsa's Boards is presented in below.
Additional data regarding Elsa's sales of Xpert snowboards are provided below. Assume that Elsa's uses a perpetual inventory system.
Instructions
- Compute ending inventory at September 30 using FIFO, LIFO and moving-average cost.
- Compare ending inventory using a perpetual inventory system to ending inventory using a periodic inventory system.
- Which inventory cost flow method (FIFO, LIFO) gives the same ending inventory value under both periodic and perpetual? Which method give different ending inventory values?
Shereen company report the following information for November and December 2019.
| November | December | |
| Cost of goods purchased | $536,000 | $610,000 |
| Inventory, beginning of month | 130,000 | 120,000 |
| Inventory, end of month | 120,000 | ? |
| Sales revenue | 840,000 | 1,000,000 |
Shereen's ending inventory at December 31 was destroyed in a fire
Instructions
- Compute the gross profit rate for November.
- Using the gross profit rate for November, determine the estimated cost of inventory lost in the fire
The inventory of Hang company was destroyed by fire on March 1. From an examination of the accounting records, the following data for the first 2 months of the year are obtained. Sales Revenue $51,000, Sale Returns and Allowances $1,000, purchases $31,200. Freight-In $1,200, and purchase Returns and Allowances $1,400.
Instructions
Determine the merchandise lost by fire, assuming.
- A beginning inventory of $20,000 and a gross profit rate of 30% on net sales.
- A beginning inventory of $30,000 and a gross profit rate of 40% on net sales.