Financial Accounting: An Integrated Statements Approach, 2nd Edition

Chapter 6 Inventories 293

Problem 6-2A

Lifo perpetual inventory

Goals3, 4

2. Gross profit, $238,900

Problem 6-3A

Periodic inventory by three
methods

Goals3, 5

1. $12,701

The beginning inventory of drift boats and data on purchases and sales for a three-month period

are shown in Problem 6-1A.

Instructions

1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual inven-
   tory record similar to the one illustrated in Exhibit 6, using the last-in, first-out method.


2. Determine the total sales, the total cost of drift boats sold, and the gross profit from sales
   for the period.


3. Determine the ending inventory cost.

Henning Appliances use the periodic inventory system. Details regarding the inventory of ap-

pliances at January 1, 2006, purchases invoices during the year, and the inventory count at

December 31, 2006, are summarized as follows:

Inventory, Purchase Invoices Inventory Count,

Model January 1 1st 2nd 3rd December 31

231T 3 at $208 3 at $212 5 at $213 4 at $225 6

673W 2 at 520 2 at 527 2 at 530 2 at 535 4

193Q 6 at 520 8 at 531 4 at 549 6 at 542 7

144Z 9 at 213 7 at 215 6 at 222 6 at 225 11

160M 6 at 305 3 at 310 3 at 316 4 at 317 5

180X — 4 at 222 4 at 232 — 2

971K 4 at 140 6 at 144 8 at 148 7 at 156 6

Instructions

1. Determine the cost of the inventory on December 31, 2006, by the first-in, first-out method.
   Present data in columnar form, using the following headings:

Model Quantity Unit Cost Total Cost

If the inventory of a particular model comprises one entire purchase plus a portion of an-

other purchase acquired at a different unit cost, use a separate line for each purchase.

2. Determine the cost of the inventory on December 31, 2006, by the last-in, first-out method,
   following the procedures indicated in (1).


3. Determine the cost of the inventory on December 31, 2006, by the average cost method, us-
   ing the columnar headings indicated in (1).


4. Discuss which method (fifo or lifo) would be preferred for income tax purposes in periods
   of (a) rising prices and (b) declining prices.

Data on the physical inventory of Timberline Company as of December 31, 2007, are presented

below.

Inventory Unit Market

Description Quantity Price

A90 35 $ 57

C18 16 200

D41 24 140

E34 125 26

F17 18 550

G68 60 15

K41 5 390

Q79 375 6

R72 100 17

S60 6 235

W21 140 18

Z35 9 700

Problem 6-4A

Lower-of-cost-or-market
inventory

Goal 7

Total LCM, $38,238