Reading 36: Inventories-LOS c 习题精选 2011, different, valuation, methods, center

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Session 9: Financial Reporting and Analysis: Inventories, Long-lived Assets, Income Taxes, and Non-current Liabilities
Reading 36: Inventories

LOS c: Calculate cost of sales and ending inventory using different inventory valuation methods and explain the impact of the inventory valuation method choice on gross profit.

 

 

Which inventory method will provide the largest net income during periods of falling prices?

A) LIFO.

B) Weighted average cost.

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.

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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

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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.

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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 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) $1,744.20.

B) $1,836.00.

C) $3,604.02.

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

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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) $1,225.

B) $1,575.

C) $3,450.

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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

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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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Given the following information and assuming beginning inventory was zero and a periodic inventory system was used, what is the gross profit at the end of the period using the FIFO, LIFO, and average cost methods?

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

FIFO

LIFO

Cost Average

A) $650 $750 $677

B) $650 $750 $990

C) $677 $650 $677

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FIFO: $5,450 ? 4,800 = $650

LIFO: $5,450 ? $4,700 = $750

Cost Average: $5,450 ? $4,773.21 = $676.79

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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) $3,604.02.

B) $3,423.82.

C) $2,918.00.

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Weighted average = cost of goods available / total units available. COGS = Units sold × weighted average = 959 × 3.7581 = $3,604.02.

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

A) $2,918.00.

B) $8,325.00.

C) $2,772.10.

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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) $1,836.00.

B) $4,142.00.

C) $1,744.20.

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

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Blocher Company is evaluating the following methods of accounting for depreciation of long-lived assets and inventory:

• Depreciation: straight-line; double-declining balance (DDB)
• Inventory: first in, first out (FIFO); last in, first out (LIFO)

Assuming a deflationary environment (prices are falling), which of the following combinations will result in the highest net income in year 1?

A) DDB; FIFO.

B) Straight-line; FIFO.

C) Straight-line; LIFO.

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For year 1, straight-line depreciation will be lower than DDB. During deflationary periods, LIFO will result in lower cost of goods sold and hence higher income.

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	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) $5,248.44 $4,351.00

C) $4,351.00 $5,248.44

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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.