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```					Solutions Guide: Please reword the answers to essay type parts so as to guarantee that your answer is an original. Do not

. Alternative Inventory Methods The perpetual inventory records of the Park Company indicate the following transactions in the
month of June: Units Cost/Unit Inventory, June 1 200 \$3.20 Purchases June 3 200 \$3.50 June 17 250 \$3.60 June 24 300 \$3.65 Sales
June 6 300 June 21 200 June 27 150 Required: Compute the cost of goods sold for June and the inventory at the end of June, using
each of the following cost flow assumptions: 1. FIFO 2. LIFO 3. Average cost (round unit costs to 2 decimal places) 4. If Park
Company uses IFRS, which of the previous alternatives would be acceptable, and why?

1.   FIFO: Cost of Goods Sold (650 units):
June 6 300 units: 200 units @ \$3.20                \$ 640
100 units @ \$3.50               350
June 21 200 units: 100 units @ \$3.50                  350
100 units @ \$3.60               360
June 27 150 units: 150 units @ \$3.60                  540
\$2,240

Ending Inventory (300 units):
Beginning Inventory + Purchases - Cost of Goods Sold = Ending Inventory
(200 x \$3.20) + [(200 x \$3.50) + (250 x \$3.60) + (300 x \$3.65)] - \$2,240 =
Ending Inventory
\$640       +          \$2,695                 -       \$2,240 = \$1,095*

*300 units @ \$3.65 = \$1,095

2.   LIFO: Cost of Goods Sold (650 units):
June 6 300 units: 100 units @ \$3.20                \$ 320.00
200 units        @ \$3.50                      700.00
June 21 200 units        @ \$3.60                      720.00
June 27 150 units        @ \$3.65                      547.50
\$2,287.50
Ending Inventory (300 units):
Beginning Inventory + Purchases - Cost of Goods Sold = Ending Inventory
\$640             + \$2,695     -      \$2,287.50      =     \$1,047.50*

*100 units @ \$3.20 =         \$ 320.00
50 units @ \$3.60 =            180.00
150 units @ \$3.65 =            547.50
\$1,047.50
3.   Average Cost:
June 1, Beginning Inventory                200 units @ \$3.20        \$ 640
June 3, Purchases 200 units @ \$3.50           700
June 3, Balance 400 units @ \$3.35          \$1,340
June 6, Sales     300 units @ \$3.35        (1,005)
June 6, Balance 100 units @ \$3.35          \$ 335
June 17, Purchases                         250 units @ \$3.60          900
June 17, Balance 350 units @ \$3.53*        \$1,235#
June 21, Sales    200 units @ \$3.53          (706)
June 21, Balance 150 units @ \$3.53         \$ 529#
June 24, Purchases                         300 units @ \$3.65         1,095
June 24, Balance 450 units @ \$3.61         \$1,624#
June 27, Sales    150 units @ \$3.61          (541)*
June 30, Balance 300 units @ \$3.61         \$1,083#

Cost of Goods Sold (650 units) \$1,005 + \$706 + \$541                 \$2,252

Ending Inventory (300 units @ \$3.61)                    \$1,083#
*Rounded
#
A slightly different answer may result due to rounding error.
4.   If Park Company uses IFRS, it may report its inventory under FIFO, average, or specific identification. It may not use LIFO under
IFRS because it is not consistent with any presumed physical flow of inventory. Also, LIFO is not allowed for tax purposes in most
other countries, so there is no tax incentive for a company to use LIFO. Note: However, companies that use IFRS and have rising
inventory costs will report a higher income because they include holding gains in income.

2. Dollar-Value LIFO On January 1, 2009, the Sato Company adopted the dollar-value LIFO method of inventory costing. The
company’s ending inventory records appear as follows: Year Current Cost Index 2009 \$40,000 100 2010 \$56,100 120 2011 \$58,500
130 2012 \$70,000 140 Required: Compute the ending inventory for the years 2009, 2010, 2011, and 2012, using the dollar-value
LIFO method (round to the nearest dollar).

Increase
Ending                            Increase                             (Decrease)
Inventory Base Year     Inventory (Decrease)    Relevant                    at     Ending
At    x Cost Index =    At         at     x Cost Index             = Relevant Inventory
Current    Current     Base-Year Base-Year    Base-Year                 Current     at                 Layers in LIFO
Date      Costs    Cost Index     Costs     Costs      Cost Index                 Costs     LIFO               Ending Inventory

12/31/09                                  \$40,000       --      x        --      =       --       \$40,000    \$40,000

100                                       120                                  40,000 (\$40,000@100)
12/31/10 \$56,100 x                    =    46,750    \$6,750     x                =    \$8,100       48,100
120                                       100                                   8,100 (\$ 6,750@120)

100                                       120                                  40,000 (\$40,000@100)
12/31/11     58,500 x                 =    45,000    (1,750)    x                =    (2,100)      46,000
130                                       100                                   6,000 (\$ 5,000@120)

100                                       140                                  40,000 (\$40,000@100)
12/31/12     70,000 x                 =    50,000     5,000     x                =      7,000      53,000
140                                       100                                   6,000 (\$ 5,000@120)
7,000 (\$ 5,000@140)

3. Comprehensive The following information for 2010 is available for the Marino Company: 1. The beginning inventory is \$100,000.
2. Purchases of \$300,000 were made on terms of 2/10, n/30. Eighty percent of the discounts were taken. 3. Purchases returns of \$4,000
were made. 4. At December 31, purchases of \$20,000 were in transit, FOB destination, on terms of 2/10, n/30. 5. The company made
sales of \$640,000. The gross selling price per unit is twice the net cost of each unit sold. 6. Sales allowances of \$6,000 were made. 7.
The company uses the LIFO periodic method and the gross method for purchases discounts. Required: 1. Compute the cost of the
ending inventory before the physical inventory is taken. 2. Compute the amount of the cost of goods sold that came from the purchases
of the period and the amount that came from the beginning inventory.

1.                                     MARINO COMPANY
Schedule for Computation of Ending Inventory

Beginning inventory                                                              \$100,000

Purchases                                                                        \$300,000
Less: Purchases returns                                                             (4,000)
\$296,000
Less: Purchases discounts taken
(\$296,000 x 0.02 x 0.80)                                                        (4,736)
Net purchases                                                                    \$291,264

Sales = \$640,000

Cost of goods sold = \$640,000  2 = \$320,000

Note to Instructor: Purchases in transit are not included in net purchases because they are being shipped FOB destination, so title has
not passed. Sales allowances are ignored because no inventory is returned and the sales price is twice the cost of sales.

Beginning Inventory + Purchases (net) - Cost of Goods Sold = Ending Inventory
\$100,000      + \$291,264         -       \$320,000      =      \$71,264
2.   Under the LIFO periodic cost flow assumption, the net purchases for the period will first be included in cost of
goods sold.

\$291,264 x 2 = \$582,528 (sales from net purchases of period)

(\$640,000 - \$582,528) = \$57,472 (sales from beginning inventory)

\$57,472  2 = \$28,736 (cost of sales from beginning inventory)

Cost of sales from purchases                                     \$291,264
Cost of sales from beginning inventory                             28,736
Total cost of goods sold                                         \$320,000

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