Reading 35: Analysis of Inventories - LOS a ～ Q1-5

答案和详解如下：

1.Baldwin, Inc. uses the last in, first out (LIFO) inventory cost flow assumption. Inventory transactions for beginning inventory and for furniture purchased and sold during 2007 were as follows:

Baldwin, Inc.’s balance sheet at December 31, 2007 will show furniture inventory of:

A)   $160,000.

B)   $180,000.

C)   $170,000.

D)   $150,000.

The correct answer was B)

Under LIFO, ending inventory consists of the oldest units acquired. During 2007, Baldwin, sold all of its inventory and recent purchases on March 18. Baldwin then purchased 300 additional units for a cost of $180,000 on August 30. Because no additional sales were made, these 300 units purchased represent all of the inventory on the December 31 balance sheet. (Even though the question says LIFO, pay attention to the dates purchases and sales are made. Simply by looking at the dates, you can see the inventory must be $180,000 without making a single calculation!)

2.Sweet Milk Inc uses the LIFO inventory method and had 5,000 units of beginning inventory on January 1, 2002, that was valued at $10.00 a unit. The company purchased 50,000 units at $12 a unit and sold 52,000 units at $15 a unit. Sweet Milk is considering an additional purchase of 10,000 units at $13 a unit. The company will make the purchase at the end of December or in the early part of year 2003. Which statement about the effect of the purchase decision on net income is most accurate?

A)   Making the purchase in December will increase income by $16,000 in year 2002.

B)   Income for year 2002 will not be affected no matter when the inventory is purchased.

C)   Postponing the purchase until January will increase income for 2002 by $14,000.

D)   Postponing the purchase until January will decrease income for year 2002 by $15,000.

The correct answer was C)

By postponing the purchase until January, COGS would be $620,000. A purchase in December would increase COGS to $634,000.

COGS for January purchase = (50,000 × 12) + (2,000 × 10) = 620, 000

COGS for December purchase = (10,000 × 13) + (42,000 × 12) = 634,000

3.Given the following inventory data about a firm:

 Beginning inventory 20 units at $50/unit

 Purchased 10 units at $45/unit

 Purchased 35 units at $55/unit

 Purchased 20 units at $65/unit

 Sold 60 units at $80/unit

What is the inventory value at the end of the period using LIFO?

A)   $1,575.

B)   $1,225.

C)   $3,450.

D)   $1,375.

The correct answer was B)   

Ending inventory equals 20 + 10 + 35 + 20 − 60 = 25 of the first units purchased equals:

(20 units)($50/unit) + (5 units)($45/unit) =

$1,000 + $225 = $1,225

4.In 2004, Torrence Co. had a beginning inventory of $19,924 and made purchases of $15,923. If the ending inventory level was $19,204, what was the Cost of Goods Sold for year 2004?

A)   $15,923.

B)   $15,203.

C)   $16,643.

D)   $720.

The correct answer was C)

Beginning Inventory + Purchases - Ending Inventory = COGS.
$19,924 + $15,923 − $19,204 = $16,643

5.Which of the following is NOT part of the basic inventory equation?

A)   Beginning inventory + purchases = ending inventory + cost of goods sold.

B)   Purchases - ending inventory + beginning inventory = cost of goods sold.

C)   Beginning inventory + purchases - cost of goods sold = ending inventory.

D)   Beginning inventory - ending inventory - cost of goods sold = purchases.

The correct answer was D)

To solve for purchases the basic inventory equation would then be: ending inventory + COGS - beginning inventory = purchases.