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Chapter 6: Q34PGB_1 (page 370)

Steel It began January with 55 units of iron inventory that cost \(35 each. During January, the company completed the following inventory transactions:

Units Unit Cost Unit Sales Price

Jan. 3 Sale 45 \) 83

8 Purchase 75 $ 52

21 Sale 70 85

30 Purchase 10 55

Requirements

1. Prepare a perpetual inventory record for the merchandise inventory using theFIFO inventory costing method.

Short Answer

Expert verified

The ending inventory under the FIFO method comes out to be $1,330.

Step by step solution

01

FIFO Method

FIFO method follows the first-in-first-out sequence to compute the cost of issued inventory. So for every issued unit, its cost is matched with the earliest purchased inventory assuming that the inventory would have been issued in a first-in-first-out manner.

02

Perpetual inventory table under the FIFO method

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Most popular questions from this chapter

Right Now Electronic Center began October with 100 units of merchandise inventory that cost \(70 each. During October, the store made the following purchases:

Oct. 3 35 units @ \) 82 each

12 45 units @ \( 84 each

18 75 units @ \) 90 each

Right Now uses the periodic inventory system, and the physical count at October 31indicates that 130 units of merchandise inventory are on hand.

Requirements

2. Net sales revenue for October totaled $26,000. Compute Right Now’s gross profitfor October using each method.

Some of L and K Electronics’s merchandise is gathering dust. It is now December 31, 2018, and the current replacement cost of the ending merchandise inventory is\(32,000 below the business’s cost of the goods, which was \)98,000. Before any adjustmentsat the end of the period, the company’s Cost of Goods Sold account has a balanceof $410,000.

Requirements

2. At what amount should the company report merchandise inventory on the balancesheet?

What does the lower-of-cost-or-market (LCM) rule require?

Question:Ward Hardware does not expect costs to change dramatically and wants to use an inventory costing method that averages cost changes.

Requirements

1. Which inventory costing method would best meet Ward’s goal?

2. Assume Ward wanted to expense out the newer purchases of goods instead.

Which inventory costing method would best meet that need?

Question:This problem continues the Canyon Canoe Company situation from Chapter 5. At the beginning of the January 2019, Canyon Canoe Company decided to carry and sellT-shirts with its logo printed on them. Canyon Canoe Company uses the perpetualinventory system to account for the inventory. During February 2019, Canyon CanoeCompany completed the following merchandising transactions:

Feb. 2 Sold 60 T-shirts at \(10 each.

5 Purchased 50 T-shirts at \)6 each.

7 Sold 45 T-shirts for \(10 each.

8 Sold 20 T-shirts for \)10 each.

10 Canyon Canoe Company realized the inventory was running

low, so it placed a rush order and purchased 20 T-shirts. The

premium cost for these shirts was \(7 each.

12 Placed a second rush order and purchased 40 T-shirts at \)7

each.

13 Sold 20 T-shirts for \(10 each.

15 Purchased 50 T-shirts for \)6 each.

20 In order to avoid future rush orders, purchased 150 T-shirts.

Due to the volume of the order, Canyon Canoe Company

was able to negotiate a cost of \(5 each.

21 Sold 40 T-shirts for \)10 each.

22 Sold 35 T-shirts for \(10 each.

24 Sold 20 T-shirts for \)10 each.

25 Sold 45 T-shirts for \(10 each.

27 Sold 40 T-shirts for \)10 each.

Requirements

1. Assume Canton Canoe Company began February with 94 T-shirts in inventorythat cost $5 each. Prepare the perpetual inventory records for February using theFIFO inventory costing method.
See all solutions

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