ACC 557 Week 4, Chapter 6 (E6-1, E6-10, E6-14, P6-3A)

EXERCISE 6-1
The correct inventory amount $351000

Ending inventory—physical count................................................. $297,000
1. No effect—title passes to purchaser upon shipment
when terms are FOB shipping point................................... 0
2. No effect—title does not transfer to Alou until
goods are received................................................................. 0
3. Add to inventory: Title passed to Alou when goods
were shipped........................................................................... 19,000
4. Add to inventory: Title remains with Alou until
purchaser receives goods.................................................... 35,000
5. No effect – title passes to purchaser upon shipment
when terms are FOB shipping point, ............................................     0
Correct inventory................................................................................ $351,000

EXERCISE 6-10
The ending inventory $26900





Cost



Market

Lower
-of-Cost-
or-Market:
Cameras

$ 6,800

$ 7,000

$ 6,800
DVD players

11,250

10,350

10,350
Ipods

10,000

9,750

9,750
Total inventory

$28,050

$27,100

$26,900

EXERCISE 6-14

(a)

Silver Company

Gold Company
Inventory Turnover

$192,000

$292,000


($47,000 + $55,000)/2
= 3.76

($71,000 + $69,000)/2
= 4.17





Days in Inventory

365/3.76 = 97 days

365/4.17 = 88 days

(b) Gold Company is moving its inventory more quickly, since its inven­tory turnover is higher, and its days in inventory is lower

PROBLEM 6-3A

REFER TO THE SCREENSHOT AT THE PAGE END FOR ANSWERS AS IN WILEYPLUS

(a)
COST OF GOODS AVAILABLE FOR SALE

Date

Explanation

Units

Unit Cost

Total Cost

1/1

Beginning Inventory

400

$ 8

$ 3,200

2/20

Purchase

300

9

2,700

5/5

Purchase

500

10

5,000

8/12

Purchase

600

11

6,600

12/8

Purchase

200

12

2,400



Total

2,000



$19,900

(b)
FIFO

(1)
Ending Inventory


(2)
Cost of Goods Sold


Date


Units

Unit Cost

Total Cost

Cost of goods available for sale


$19,900

12/8

200

$12

$2,400

Less: Ending inventory


5,700
8/12
300
11

3,300



500



$5,700

Cost of goods sold

$14,200














Proof of Cost of Goods Sold



Date


Units

Unit Cost

Total Cost


1/1

400

$ 8

$ 3,200


2/20

300

9

2,700


5/5

500

10

5,000




300

11

3,300




1,500



$14,200

(b)
LIFO

(1)
Ending Inventory


(2)
Cost of Goods Sold


Date


Units

Unit Cost

Total Cost

Cost of goods available for sale


$19,900

1/1

400

$8

$3,200

Less: Ending inventory


4,100
2/20
100
9

900



500



$4,100

Cost of goods sold

$15,800

Proof of Cost of Goods Sold

Date


Units

Unit Cost

Total Cost
12/8

200

$12

$ 2,400
8/12

600

11

6,600
5/5

500

10

5,000
2/20

200

9

1,800


1,500



$15,800





AVERAGE-COST

(1)
Ending Inventory

(2)
Cost of Goods Sold

$19,900 ÷ 2,000 = $9.95

Cost of goods available for sale


$19,900


Units

Unit Cost

Total Cost

Less: Ending inventory


4,975
500
$9.95

$4,975
Cost of goods sold

$14,925

Proof of Cost of Goods Sold





1,500 units X 9.95 = $14,925





(c) (1) LIFO results in the lowest inventory amount for the balance sheet, $4,100.

(2) FIFO results in the lowest cost of goods sold, $14,200.
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