Question 11 pts Company X purchased inventory for $2,700. X normally pays additi

Question

Question 11 pts

Company X purchased inventory for $2,700. X normally pays additional shipping charges of $300 per order, but in this one instance paid $900 to rush the shipment because inventory levels on hand had fallen unusually low. At what cost should X record the inventory? (omit , and $ in the answer)

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Question 21 pts

On December 20, 2012, Company X purchased $100 of inventory on account from its supplier. The supplier offered a 2% discount on the purchase if X pays within 10 days. X paid the discounted $98 on December 27. At what amount would X report the inventory on its balance sheet dated December 31? X uses the gross method of accounting for purchase discounts. (omit , and $ in the answer)

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Question 31 pts

When prices are rising, which inventory method produces a higher Ending Inventory?

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Question 41 pts

When prices are falling, which inventory method generally produces a more accurate Ending Inventory?

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Question 51 pts

Raw materials are not considered to be Inventory when they are first purchased; only after they are actually used in production.

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Question 61 pts

In March 2012, X Corp. purchased an item of inventory for $400. By June, that item could be purchased for $360 and re-sold for $440. X’s normal profit for the item is $50. At what amount should X report the item in its June 30 balance sheet? X uses the LIFO inventory cost flow assumption. (omit , and $ in the answer)

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Question 71 pts

X, Inc., uses the LIFO cost flow assumption. X had 100 items in its Jan. 1 beginning inventory balance, totaling $500 (that is, $5 each). X purchased another 200 items on Jan. 9 for $7 each. On Jan. 12 X sold 230 items for $10 each. By how much did this LIFO liquidation increase X's usual profit on a sale of 230 items? (omit , and $ in the answer)

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Question 81 pts

X, Inc., is a manufacturer that can produce 10,000 units per quarter at capacity. However, normal production ranges from 9,000 to 10,000 units. During the quarter, X has fixed overhead costs of $80,000 and produces only 8,000 units due to unexpected maintenance issues that forced the facility to close for several days. How much of the $80,000 in fixed overhead costs should X include in its Inventory balances for the quarter? (use the approach we discussed in class and omit , and $ in the answer)

Explanation / Answer

Solution:

11)

Inventory should be recorded at cost $3,600

Because all the expenses incurred to bring the material in the factory is to be added in material price and be a part of purchase cost.

21)

Under Gross Method, the purchase is recorded initially at gross price (i.e. material price at the time of purchase) and thereafter, if the payment is made within the period of discount, the discount is recorded in the books by crediting purchase discounts and debiting Accounts Payable.

Under Gross Method the purchase is recorded at gross price i.e. $100

Gross Method assumes that the discount will not be taken and records the purchase at gross price.

Hence, Company X would report the Inventory on its balance sheet dated December 31 at $100 (Gross Price)

31)

In case of rising prices, FIFO method produces a higher Ending Inventory because the material purchased first is to be first.

Earlier when the material was purchased at the below price, now the prices are rising.

Under FIFO method Ending Inventory is valued at the latest price which is in this question is Rising Prices, hence this method produces a higher ending inventory.

41)

When prices are falling, FIFO Method generally produces a more accurate Ending Inventory. Because Under FIFO method Ending Inventory is valued at the latest price which is in this question is falling prices which produces more accurate value of ending inventory.

For rest part --- please ask separate question..

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