Reading 36: Inventories LOS c习题精选 average, account, beginning, face, 2010

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LOS c: Compute ending inventory balances and cost of goods sold using the FIFO, weighted average cost, and LIFO methods to account for product inventory.

JME had beginning inventory of $200 and ending inventory of $300. JME had COGS of $800. JME must have purchased inventory amounting to:

A) $700.

B) $900.

C) $1,100.

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200 + X – 300 = 800

X = purchases = 900

 

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JME purchased 400 units of inventory that cost $4.00 each. Later the firm purchased an additional 500 units that cost $5.00 each. JME sold 700 units of inventory for $7.00 each. If JME uses a first in, first out (FIFO) cost flow method, the amount of gross profit appearing on the income statement is:

A) $2,400.

B) $3,100.

C) $1,800.

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(700 × 7.00) – [(400 × 4.00) + (300 × 5.00)] = 1,800

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Which of the following inventory accounting methods must be used for financial reporting purposes if a U.S. firm uses last in, first out (LIFO) for tax purposes?

A) LIFO.

B) The firm may use any of the above methods.

C) FIFO.

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If a U.S. firm uses LIFO for tax purposes, it must also use LIFO for financial reporting purposes, according to U.S. tax law.

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While attending a local college, music major Anjolie Webster accepts a temporary position with a small manufacturing firm. Currently, the firm uses LIFO to account for inventory, but the owner is “just curious” about how the financial results would look if the company used FIFO. Before the owner leaves for her voice lesson, she hands Webster a photocopy of the inventory data for the current period (summarized below).

• Beginning inventory of 1,000 units at $30 cost.
• Ending inventory of 800 units.
• Sales of 1,100 units.
• Three inventory purchases (listed from earliest purchase to latest purchase): 400 units at $27 each, 300 units at $25 each, and an unreadable number of units at $22 each. (Unfortunately, when the owner copied the original document, she left a yellow sticky note covering some of the inventory information.)
• Current assets (less inventory) of $75,000.
• Current liabilities of $65,000.

Using the information provided, determine which of the following statements is least accurate? All else equal, compared to LIFO, using FIFO would result in:

A) a lower ending inventory balance.

B) a lower gross margin.

C) a current ratio of approximately 1.60.

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To calculate the current ratio (which includes the ending inventory balance) using FIFO, we first need to determine how many units were purchased in the third illegible purchase order.

Ending inventory = beginning inventory + units purchased – units sold, so
units purchased = units sold + ending inventory – beginning inventory
= 1,100 + 800 – 1,000 = 900
Third purchase units = 900 – 400 – 300 = 200

• FIFO ending inventory = [(300 × 27) + (300 × 25) + (200 × 22)] = $20,000

• FIFO current ratio (all else equal) = (75,000 + 20,000) / 65,000 = approximately 1.46

The other choices are correct. Since prices are decreasing, FIFO cost of goods sold is higher (and gross margin is lower) than LIFO. And, FIFO ending inventory is lower than LIFO ending inventory. No LIFO calculations are necessary.

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An analyst notes the following about a company:

• Beginning inventory was reported as $5,000.
• Costs of goods sold were reported as $8,000.
• Ending inventory is $7,000 (the analyst has physically verified this amount).

Which of the following statements is most accurate?

A) If the analyst discovered that beginning inventory was understated by $2,000, then earnings before taxes must have been overstated by $2,000.

B) If the analyst discovered that beginning inventory was overstated by $1,000, then cost of goods sold must have been understated by $1,000.

C) Purchases must have been $6,000.

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If inventory is overstated then COGS must also be overstated or purchases were understated, since you are told that ending inventory is ok.

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	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 weighted average method?

A) $3,423.82.

B) $3,604.02.

C) $2,918.00.

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Weighted average = cost of goods available / total units available. COGS = Units sold × weighted average = 959 × 3.7381 = $3,604.02.

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What is the cost of goods sold using the first in, first Out (FIFO) method?

A) $8,325.00.

B) $2,772.10.

C) $2,918.00.

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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) $4,142.00.

B) $1,744.20.

C) $1,836.00.

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

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Purchases	Sales
20 units at $50	15 units at $60
35 units at $40	35 units at $45
85 units at $30	85 units at $35

Assume beginning inventory was zero.

Inventory value at the end of the period using the average cost method is:

A) $177.

B) $4,680.

C) $1,540.

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Average Cost = Cost of Goods Available / Total Units Available

Average Cost = $4,950 / 140 = $35.36

EOP Inventory Value = $35.36 × 5 = $176.79

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Inventory value at the end of the period using FIFO is:

A) $1,200.

B) $150.

C) $175.

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(Units purchased minus units sold) times cost = EOP value

(140 – 135) × $30 = $150

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Inventory value at the end of the period using LIFO is:

A) $1,200.

B) $2,400.

C) $250.

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5 × $50 = $250

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A firm uses the last in, first out (LIFO) accounting method and posts $100,000 as ending inventory. Last year's financial statements show inventory at $110,000. This period's income statement shows costs of goods sold at $90,000 with a LIFO reserve of $30,000. How much inventory was purchased this period, and what would the ending inventory balance be under first in, first out (FIFO)?

       Inventory purchases    Ending inventory (FIFO)

A) $80,000    $130,000

B) $90,000    $130,000

C) $80,000    $70,000

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EI = BI + P - COGS

100 = 110 + P - 90

P = $80,000

In order to convert ending inventory under FIFO to LIFO you have to add the LIFO reserve to the ending inventory under LIFO.
EI_FIFO = $100,000 + $30,000 = $130,000

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The Mountain Bike Supply Company had 500 units in its beginning inventory. Each of these units cost $5. During the period, Mountain Bike Supply first purchased 400 units at $6 each and then 200 units at $7 each. At the end of the period, Mountain Bike Supply had 600 units. What is the cost of goods sold and inventory for Mountain Bike Supply if it uses FIFO inventory valuation?

COGS

Inventory

A) $2,500 $3,100

B) $3,200 $3,100

C) $2,500 $3,800

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Under FIFO:

COGS	= 500 @ $5 = $2,500
Inventory	= 200 @ $7 + 400 @ $6 = $3,800

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A company's beginning inventory was overstated by $3,000, now ending inventory is understated by $2,000. If purchases were properly reported, then earnings before taxes will be:

A) overstated by $1,000.

B) overstated by $5,000.

C) understated by $5,000.

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Cost of goods sold (COGS) will be overstated by 5,000 so earnings before taxes (EBT) will be understated by 5,000.