ACC 557 Week 4, Chapter 6 (E6-1, E6-10, E6-14, P6-3A)

EXERCISE 6-1

The correct inventory amount $351000

Ending inventory—physical count.................................................     $297,000

    1.    No effect—title passes to purchaser upon shipment

           when terms are FOB shipping point...................................                   0

    2.    No effect—title does not transfer to Alou until

           goods are received.................................................................                   0

    3.    Add to inventory:  Title passed to Alou when goods

           were shipped...........................................................................          19,000

    4.    Add to inventory:  Title remains with Alou until

           purchaser receives goods....................................................          35,000

    5.    No effect – title passes to purchaser upon shipment
when terms are FOB shipping point, ............................................               0

Correct inventory................................................................................      $351,000

EXERCISE 6-10

The ending inventory $26900

		Cost		Market		Lower -of-Cost- or-Market:
Cameras		$  6,800		$  7,000		$  6,800
DVD players		11,250		10,350		10,350
Ipods		10,000		9,750		9,750
Total inventory		$28,050		$27,100		$26,900

EXERCISE 6-14

(a)		Silver Company		Gold Company
Inventory Turnover		$192,000		$292,000
		($47,000 + $55,000)/2 = 3.76		($71,000 + $69,000)/2 = 4.17
Days in Inventory		365/3.76 = 97 days		365/4.17 = 88 days

(b)        Gold Company is moving its inventory more quickly, since its inven­tory turnover is higher, and its days in inventory is lower

PROBLEM 6-3A

REFER TO THE SCREENSHOT AT THE PAGE END FOR ANSWERS AS IN WILEYPLUS

(a)	COST OF GOODS AVAILABLE FOR SALE
	Date		Explanation		Units		Unit Cost		Total Cost
	1/1		Beginning Inventory		400		$  8		$  3,200
	2/20		Purchase		300		9		2,700
	5/5		Purchase		500		10		5,000
	8/12		Purchase		600		11		6,600
	12/8		Purchase		200		12		2,400
			Total		2,000				$19,900

(b)	FIFO
	(1)	Ending Inventory								(2)	Cost of Goods Sold
	Date			Units		Unit Cost		Total Cost		Cost of goods available for sale			$19,900
	12/8			200		$12		$2,400		Less:  Ending inventory			5,700
	8/12			300		11		3,300
				500				$5,700		Cost of goods sold			$14,200

	Proof of Cost of Goods Sold
	Date			Units		Unit Cost		Total Cost
	1/1			400		$  8		$  3,200
	2/20			300		9		2,700
	5/5			500		10		5,000
				300		11		3,300
				1,500				$14,200
(b)	LIFO
	(1)	Ending Inventory								(2)	Cost of Goods Sold
	Date			Units		Unit Cost		Total Cost		Cost of goods available for sale			$19,900
	1/1			400		$8		$3,200		Less:  Ending inventory			4,100
	2/20			100		9		900
				500				$4,100		Cost of goods sold			$15,800

Proof of Cost of Goods Sold
Date		Units		Unit Cost		Total Cost
12/8		200		$12		$  2,400
8/12		600		11		6,600
5/5		500		10		5,000
2/20		200		9		1,800
		1,500				$15,800

	AVERAGE-COST
	(1)			Ending Inventory							(2)	Cost of Goods Sold
	$19,900 ÷ 2,000 = $9.95										Cost of goods available for sale			$19,900
		Units				Unit Cost		Total Cost			Less:  Ending inventory			4,975
		500				$9.95		$4,975			Cost of goods sold			$14,925
			Proof of Cost of Goods Sold
			1,500 units X 9.95 = $14,925

(c)   (1)   LIFO results in the lowest inventory amount for the balance sheet, $4,100.

       (2)   FIFO results in the lowest cost of goods sold, $14,200.

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