Acc557 Financial Accounting: Week 4 Chapter 6 (E6-1,E6-10,E6-14,P6-3A)

Acc557 Financial Accounting
Week 4 Chapter 6 (E6-1,E6-10,E6-14,P6-3A)

E6-1
Premier Bank and Trust is considering giving Alou Company a loan. Before doing so, management decides that further discussions with Alou’s accountant may be desirable. One area of particular concern is the inventory account, which has a year-end balance of $297,000. Discussions with the accountant reveal the following.
1. Alou sold goods costing $38,000 to Comerico Company, FOB shipping point, on December 28. The goods are not expected to arrive at Comerico until January 12. The goods were not included in the physical inventory because they were not in the warehouse.
2. The physical count of the inventory did not include goods costing $95,000 that were shipped to Alou FOB destination on December 27 and were still in transit at year-end.
3. Alou received goods costing $19,000 on January 2. The goods were shipped FOB shipping point on December 26 by Grant Co. The goods were not included in the physical count.
4. Alou sold goods costing $35,000 to Emerick Co., FOB destination, on December 30. The goods were received at Emerick on January 8. They were not included in Alou's physical inventory.
5. Alou received goods costing $44,000 on January 2 that were shipped FOB shipping point on December 29. The shipment was a rush order that was supposed to arrive December 31. This purchase was included in the ending inventory of $297,000.

Determine the correct inventory amount on December 31.

E6-10
Fenton Company applied FIFO to its inventory and got the following results for its ending inventory.
Cameras 100 units at a cost per unit of $68
DVD 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 $70, DVD players $69, and iPods $78.
Determine the amount of ending inventory at lower-of-cost-or-market.

E6-14
The cost of goods sold computations for Silver Company and Gold Company are shown below.
Silver Company Gold Company
Beginning inventory 47,000 71,000
Cost of goods purchased 200,000 290,000
Cost of goods available for sale 247,000 361,000
Ending inventory 55,000 69,000
Cost of goods sold 192,000 292,000

Instructions:
(a) Compute inventory turnover for each company. (Round answers to 2 decimal places, e.g. 1.25.)
(b) Compute days in inventory for each company. (Round inventory turnover values to 2 decimal places, e.g. 1.25 and final answers to 0 decimal places, e.g. 125.)

Problem 6-3A
Milo Company had a beginning inventory of 400 units of Product Kimbo at a cost of $8 per unit. During the year, purchases were:
20-Feb 300 @ $9
12-Aug 600 @ $11
5-May 500 @ $10
8-Dec 200 @ $12
Milo Company uses a periodic inventory system. Sales totaled 1,500 units.

Instructions:
(a) Determine the cost of goods available for sale.
(b) Calculate the weighted-average unit cost. (Round answer to 2 decimal places, e.g. $2.25.)
(c) Determine (1) the ending inventory, and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost). (Round answers to 0 decimal places, e.g. $2,120.)
(d) Which cost flow method results in (1) the lowest inventory amount for the balance sheet, and (2) the lowest cost of goods sold for the income statement?
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