The following data represent the beginning inventory and, in the order of occurr
ID: 2335602 • Letter: T
Question
The following data represent the beginning inventory and, in the order of occurrence, the purchases and sales of McKensie Company for an operating period.
Units
Unit Cost
Total Cost
Units Sold
Units on Hand
20
$29
$ 580
20
20
31
620
40
30
10
90
32
2,880
100
80
20
70
36
2,520
90
200
$6,600
Assuming McKensieCompany uses LIFO periodic inventory procedures, the ending inventory cost is:
Select one:
A. $2,610
B. $3,160
C. $3,130
D. $2,800
E. None of the above
The lower-of-cost-or-market method for inventory:
Select one:
A. States that inventory must be reported on the balance sheet at its current replacement cost
B. Must be applied to inventory on an item by item basis
C. Places losses from price declines in the period the goods are sold rather than in the period of the price decline
D. May cause inventory to be written up to an amount larger than historic cost
E. None of the above
Units
Unit Cost
Total Cost
Units Sold
Units on Hand
Beginning Inventory20
$29
$ 580
20
Purchase no. 120
31
620
40
Sale no. 130
10
Purchase no. 290
32
2,880
100
Sale no. 280
20
Purchase no. 370
36
2,520
90
Totals200
$6,600
Explanation / Answer
Units Available for sale= 20+20+90+70 = 200 units
Units Sold = 30+80 = 110 Units
Units available for ending Inventory = 200-110 = 90 units
Under Periodic Inventory procedure, the ending Inventory Cost is derived as under:
Cost of Goods Sold is as under:
- Purchase no 3 : 70 units are sold
-Purchase no 2 : 40 Units will be sold
Now following inventory is left out whse value is derived as under:
- Balance available from Purchase no 2 50 units @ $ 32 = 1600 $
- Balance available from Purchase no 1 20 units @ $ 31 = 620$
- Beginning Inventory 20 units @$ 29 = 580$
Total Inventory 110 units 2800 $
Hence the Answer is D $ 2800
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