1. McCaughey Company uses a periodic inventory system. It sold 1,000 units of Pr
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Question
1. McCaughey Company uses a periodic inventory system. It sold 1,000 units of Product H. Its beginning inventory and purchases during the month were as follows:
April 1 Beginning inventory 200 units @ $1
5 purchases 200 units @ $2
10 purchases 200 units @ $3
15 purchases 200 units @ $4
20 purchases 200 units @ $5
25 purchases 200 units @ $6
Compute the cost of ending inventory under each of three methods: (a) average cost, (b) LIFO, and (c) FIFO. (Show your work)
2. Pearson Company uses a periodic inventory system. During the first quarter of 2014, it sold 13,000 cases of Product A for $140,000. Facts related to its beginning inventory and purchases are as follows:
Jan 1 Beginning inventory 5,000 cases @ $4.00
10 purchases 4,000 cases @ $5.00
Feb. 13 purchases 8,000 cases @ $4.50
Mar. 5 purchases 2,500 cases @ $5.00
For the quarter ended March 31, 2014, compute the ending inventory, cost of goods sold, and gross margin under three methods: (a) average-cost, (b) FIFO, and (c) LIFO. (Show your work)
3. Up to the date of a fire that completely destroyed Singer's inventory, Hummer had sales of $1,200,000, purchases of $1,000,000, and freight-in of $45,000. The cost of beginning inventory was $75,000 and the company's typical gross profit was 38 percent. Using the gross profit method, estimate Singer's inventory loss from the fire. (Show your work.)
4. Pearson Company uses the retail method to estimate the cost of ending inventory. Use the following information to estimate the cost of Pearson's ending inventory on December 31, 2014, using the retail method. Show your answer in good form.
January 1, 2014 inventory cost: $35,000 retail: $65,000
Purchases 162, 500 265,000
Purchases returns & allowance (6,000) (10,000)
Freight In 8,500
Sales 274,500
Sales return & allowance (7,500)
Explanation / Answer
Solution:
(1).
(A). Caluculation of Endind Inventory:
Begining Inventory 200
Add: Purchase 200
Add: Purchase 200
Add: Purchase 200
Add: Purchase 200
Add: Purchase 200
Total Inventory = 1,200
Less: Sales 1,000
Ending Inventory = 2,00
(B). Using FIFO Method:
Ending Inventory 200 * 6 1,200
Cost of Goods Sold:
200 * 2 400
200 * 3 600
200 * 4 800
200 * 5 1,000
Cost of Goods Sold = 2,800
(C). Ending Inventoy 200 * 6 1,200
200 * 6 1,200
200 * 5 1,000
200 * 4 800
200 * 3 600
Cost of Goods Sold = 3,600
(3).
Company Begining Inventory 75,000
Company Purchase Inventory 10,00,000
Company Fright- Charges 45,000
Total Costs = 11,20,000
Company Sales 12,00,000
Profit = 80,000
Estimated Gross Profit = 12,00,000 * 38 / 100
= 4,56,000
(4) Caluculation of Endig Inventory:
A = Cost of Begining Inventory
B = Purchases and Fright-inwords
C = Retaile Value of Begining Inventory
D = Retaile Value Goods Purchased
= 35,000 + 1,56,500 / 65,000 + 2,55,000
= 1,91,500 / 3,20,000
= 0.598
Purchase Cost Retaile
Purchase 1,62,500 2,65,000
Less: Returns 6,000 10,000
Amount 1,56,500 2,55,000
Ending Inventory = A + B / C + DRelated Questions
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