RQ21-11 (similar to) Question Help Included in the December 31, 2016, inventory

Question

RQ21-11 (similar to) Question Help Included in the December 31, 2016, inventory of the Little Lamb Supply Company are 2,300 deluxe ring binders in the amount of $6,634. An examination of the most recent acquisitions of binders showed the following costs: January 26, 2017, 2,000 at $2.88 each; December 6, 2016, 1,800 at $2.83 each, November 26, 2016, 2,100 at $2.63 each. What is the misstatement in valuation of the December 31, 2016, inventory for deluxe ring binders, assuming FIFO inventory valuation? What would your answer be if the January 26, 2017, acquisition was for 2,000 binders at $2.66 each? What is the misstatement in valuation of the December 31, 2016, inventory for deluxe ring binders, assuming FIFO inventory valuation? Assuming FIFO inventory valuation, the December 31, 2016 inventory balance for deluxe ring binders should be S 6,409 As such, the ending inventory $ 225 $6,634 at December 31, 2016 is overstated by balance of What would your answer be if the January 26, 2017, acquisition was for 2,000 binders at $2.66 each? If the January 26, 2017, acquisition was for 2,000 binders at $2.66 each, the current ending inventory balance for deluxe ring binders should be by As such, the ending inventory balance of $6,634 at December 31, 2016 would be

Explanation / Answer

Inventory Purchase (excluding Jan Purchases) 6-Dec 1800 units 2.83 26-Nov 2100 units 2.63 Ending inventory as on Dec 31, 2016: 2300 Ending inventory valuation as per FIFO: 6-Dec 1800 units 2.83 5094 26-Nov 500 units 2.63 1315 Correct valuation of Inventory 6409 Inventory shown 6634 Overstated Valuation 225 Asuming FIFO, the December 2016 valuation of deluxe ring binder is $ 6409. As such ending balance of $6634 is overstated by $ 225 If the Jan26,2017 acquisition was for 2000 binders at 266 each, the current ending balance for balance will be $6409 As such ending balance of $6634 would be overstated by $ 225 Note: there is no change in Inventory valuation for the change in prices of jan as the date does not fall with in the purview of year in question.

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