Financial Accounting: An Integrated Statements Approach, 2nd Edition

Chapter 6 Inventories 295

Number Per

Date Transaction of Units Unit Total

June 5 Purchase 750 $2.40 $1,800

13 Sale 350 5.00 1,750

23 Purchase 400 2.60 1,040

30 Sale 500 5.00 2,500

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 5, using the first-in, first-out method.


2. Determine the total sales and the total cost of floor mats sold for the period. Journalize
   the entries in the sales and cost of merchandise sold accounts. Assume that all sales were
   on account.


3. Determine the gross profit from sales for the period.


4. Determine the ending inventory cost.

The beginning inventory of floor mats at International Office Supplies and data on purchases

and sales for a three-month period are shown in Alternate Problem 6-1B.

Instructions

1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual
   inventory 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 floor mats sold, and the gross profit from sales
   for the period.


3. Determine the ending inventory cost.

Three Forks Appliances uses the periodic inventory system. Details regarding the inventory of

appliances at May 1, 2005, purchases invoices during the year, and the inventory count at April 30,

2006, are summarized follows.

Inventory, Purchase Invoices Inventory Count,

Model May 1 1st 2nd 3rd April 30

AC54 2 at $250 2 at $260 4 at $271 4 at $272 6

BH43 6 at 80 5 at 82 8 at 89 8 at 90 6

G113 2 at 108 2 at 110 3 at 128 3 at 130 5

K243 8 at 88 4 at 79 3 at 85 6 at 92 8

PM18 7 at 242 6 at 250 5 at 260 10 at 259 8

Q661 5 at 160 4 at 170 4 at 175 7 at 180 8

W490 — 4 at 150 4 at 200 4 at 202 5

Instructions

1. Determine the cost of the inventory on April 30, 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 April 30, 2006, by the last-in, first-out method, fol-
   lowing the procedures indicated in (1).


3. Determine the cost of the inventory on April 30, 2006, by the average cost method, using
   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.

Alternate Problem
6-2B

Lifo perpetual
inventory

Goals3, 4

2. Gross profit, $4,785

Alternate Problem

6-3B

Periodic inventory by three

methods

Goals3, 5

1. $8,053