honeycfa

Which of the following is least likely part of the basic inventory equation?

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

B) Beginning inventory ? ending inventory ? cost of goods sold = purchases.

C) Purchases ? ending inventory + beginning inventory = cost of goods sold.

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

honeycfa

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 (COGS) for year 2004?

A) $16,643.

B) $15,203.

C) $15,923.

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

honeycfa

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) $3,450.

C) $1,225.

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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

honeycfa

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) $3,450.

C) $1,225.

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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

honeycfa

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 first in, first out (FIFO)?

A) $1,575.

B) $3,475.

C) $3,100.

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Ending inventory equals 20 + 10 + 35 + 20 ? 60 = 25 of last units purchased in inventory.

(20 units)($65/unit) + (5 units)($55/unit) = $1,300 + $275 = $1,575

honeycfa

	Units	Unit Price
Beginning Inventory	699	$5.00
Purchases	710	$8.00
Sales	806	$15.00
SGA Expenses	$3,141 per annum

Determine the cost of goods sold using the weighted average method and also using the first in, first out (FIFO) method.

Weighted Average

FIFO

A) $4,986.02 $4,133.45

B) $4,351.00 $5,248.44

C) $5,248.44 $4,351.00

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Weighted average = cost of goods available / total units available. COGS = Units sold × wt. ave = 806 × 6.51171 = $5,248.44.

FIFO COGS = (699 × 5) + (107 × 8) = $4,351.00.

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What is the ending inventory level in dollars using the FIFO method?

A) $4,824.00.

B) $6,160.00.

C) $4,582.80.

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Ending Inventory = 603 × 8 = $4,824.00.

honeycfa

	Units	Unit Price
Beginning Inventory	709	$2.00
Purchases	556	$6.00
Sales	959	$13.00
SGA Expenses	$2,649 per annum

What is the cost of goods sold using the average cost method and using the first in first out (FIFO) method?

Average Cost

FIFO

A) $3,604.02 $2,918.00

B) $4,142.02 $2,918.00

C) $3,604.02 $3,423.82

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Average cost = cost of goods available/total units available. COGS = Units sold × avg. cost = 959 × 3.7381 = $3,604.02.

FIFO COGS = (709 × 2) + (250 × 6) = $2,918.00

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What is the ending inventory level in dollars using the FIFO Method?

A) $1,836.00.

B) $1,744.20.

C) $3,604.02.

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Ending Inventory = 306 × 6 = $1,836.00.

honeycfa

An analyst provided the following information about a company:

• Purchases throughout the year         $55,000

• COGS                                            $60,000

•  Ending inventory                             $35,000

The beginning inventory was:

A) $45,000.

B) $40,000.

C) $55,000.

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COGS of $60,000 + ending inventory of $35,000, less purchases of $55,000.

honeycfa

Arlington, Inc. uses the first in, first out (FIFO) inventory cost flow assumption. Beginning inventory and purchases of refrigerated containers for Arlington were as follows:

	Units	Unit Cost	Total Cost
Beginning Inventory	20	$10,000	$200,000
Purchases, April	10	12,000	120,000
Purchases, July	10	12,500	125,000
Purchases, October	20	15,000	300,000

In November, Arlington sold 35 refrigerated containers to Johnson Company. What is the cost of goods sold assigned to the 35 sold containers?

A) $485,000.

B) $434,583.

C) $382,500.

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Under FIFO, cost of goods sold is the value of the first units purchased. The 35 units sold consist of the 20 units in beginning inventory, the 10 units purchased in April, and 5 of the units purchased in July. COGS = $200,000 + $120,000 + (5 × $12,500) = $382,500.

honeycfa

Which inventory method will provide a larger net income during periods of falling prices?

A) Specific Items.

B) LIFO.

C) FIFO.

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During periods of falling prices last in, first out (LIFO) provides a higher net income than first in, first out (FIFO) or the average cost methods because the items most recently purchased are the ones being sold first and these costs are continually falling increasing net income. Using FIFO during periods of falling prices would cause net income to be lower than LIFO or average cost methods because the first inventory purchased is the first sold but during periods of falling prices this is the most expensive inventory causing net income to be lower.