Connect Financial Accounting Chapter 5

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Connect Financial Accounting Chapter 5

Q1. Walberg Associates, antique dealers, purchased the contents of an estate for $37,700. Terms of the purchase were FOB shipping point, and the cost of transporting the goods to Walberg Associates’s warehouse was $1,300. Walberg Associates insured the shipment at a cost of $170. Prior to putting the goods up for sale, they cleaned and refurbished them at a cost of $510.

Determine the cost of the inventory acquired from the estate.

connect financial accounting chapter 5

Q2. Laker Company reported the following January purchases and sales data for its only product.

Date Activities Units Acquired at Cost Units sold at Retail
Jan 1 Beginning inventory 205 units @ $13.00  = $2,665
Jan 10 Sales 165 units @ $22.00
Jan 20 Purchase 140 units @ $12.00  = 1,680
Jan 25 Sales 145 units @ $22.00
Jan 30 Purchase 310 units @ $11.50 = 3,565
Totals 655 units $7,910 310 units

The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 345 units, where 310 are from the January 30 purchase, 5 are from the January 20 purchase, and 30 are from beginning inventory.

1. Complete the table to determine the cost assigned to ending inventory and cost of goods sold using specific identification.

connect financial accounting chapter 5

2. Determine the cost assigned to ending inventory and to cost of goods sold using weighted average.

connect financial accounting chapter 5

3. Determine the cost assigned to ending inventory and to cost of goods sold using FIFO.

connect financial accounting chapter 5

4. Determine the cost assigned to ending inventory and to cost of goods sold using LIFO.

connect financial accounting chapter 5

Q3. Hemming Co. reported the following current-year purchases and sales for its only product.

 

Date Activities Units Acquired at Cost Units sold at Retail
Jan 1 Beginning inventory 225 units @ $11.00 = $2,475
Jan 10 Sales 150 units @ $41.00
Mar 14 Purchase 340 units @ $16.00 = 5,440
Mar 15 Sales 300 units @ $41.00
July 30 Purchase 425 units @ $21.00 = 8,925
Oct 5 Sales 390 units $41.00
Oct 26 Purchase 125 units @ $26.00 = 3,250
Totals 1,115 units $20,090 845 units

Hemming uses a periodic inventory system.

a. Determine the costs assigned to ending inventory and to cost of goods sold using FIFO.

connect financial accounting chapter 5

b. Determine the costs assigned to ending inventory and to cost of goods sold using LIFO.

connect financial accounting chapter 5

c. Compute the gross margin for each method.

connect financial accounting chapter 5

Connect Financial Accounting Chapter 5 Quiz

Q1. Use the following information for Davis Company to compute inventory turnover for Year 2.

Year 2 Year 1
Cost of goods sold 279,500 291,800
Ending inventory 47,700 49,350
  • 5.86
  • 5.76
  • 5.67
  • 11.77
  • 5.89

Q2. Eastview Company uses a perpetual LIFO inventory system, and has the following purchases and sales:

January 1 150 units were purchased at $9 per unit.
January 17 120 units were sold.
January 20 160 units were purchased at $11 per unit.
January 29 150 units were sold.

What is the value of ending inventory?

  • $2,730
  • $2,750
  • $2,670
  • $440
  • $380

Q3. Acceptable methods of assigning specific costs to inventory and cost of goods sold include all of the following except:

  • LIFO method.
  • FIFO method.
  • Specific identification method.
  • Weighted average method.
  • Retail method.

Q4. Hull Company reported the following income statement information for the current year:

 

Sales $410,000
Cost of goods sold:
Beginning inventory $132,000
Cost of goods purchased 273,000
Cost of goods available for sale 405,000
Ending inventory 144,000
Cost of goods sold 261,000
Gross profit $149,000

The beginning inventory balance is correct. However, the ending inventory figure was overstated by $20,000. Given this information, the correct gross profit would be:

  • $149,000
  • $169,000
  • $129,000
  • $142,000
  • $112,000

Q5. The understatement of the ending inventory balance causes:

  • Cost of goods sold to be overstated and net income to be understated.
  • Cost of goods sold to be overstated and net income to be overstated.
  • Cost of goods sold to be understated and net income to be understated.
  • Cost of goods sold to be understated and net income to be overstated.
  • Cost of goods sold to be overstated and net income to be correct.

Q6. Monarch Company uses a weighted-average perpetual inventory system, and has the following purchases and sales:

January 1 20 units were purchased at $10 per unit.
January 12 12 units were sold.
January 20 18 units were purchased at $11 per unit.

What is the value of ending inventory? (Round average cost per unit to 2 decimal places.)

  • $278
  • $272
  • $126
  • $398
  • $120

Q7. Grays Company has inventory of 10 units at a cost of $10 each on August 1. On August 3, it purchased 20 units at $12 each. 12 units are sold on August 6. Using the FIFO perpetual inventory method, what amount will be reported as cost of goods sold for the 12 units that were sold?

  • $120
  • $124
  • $128
  • $130
  • $140

Q8. A company had the following purchases and sales during its first year of operations:

Purchases Sales
January: 10 units at $120 6 units
February: 20 units at $125 5 units
May: 15 units at $130 9 units
September: 12 units at $135 8 units
November: 10 units at $140 13 units

On December 31, there were 26 units remaining in ending inventory. Using the Periodic FIFO inventory valuation method, what is the cost of the ending inventory? (Assume all sales were made on the last day of the month.)

  • $3,405
  • $3,200
  • $3,445
  • $3,540
  • $3,270

Q9. If a period-end inventory amount is reported in error, it can cause a misstatement in all of the following except:

  • Cost of goods sold.
  • Gross profit.
  • Net sales.
  • Current assets.
  • Net income.

Q10. Salmone Company reported the following purchases and sales of its only product. Salmone uses a perpetual inventory system. Determine the cost assigned to cost of goods sold using FIFO.

Date Activities Units Acquired at Cost Units Sold at Retail
May 1 Beginning Inventory 150 units @ $10.00
5 Purchase 220 units @ $12.00
10 Sales 140 units @ $20.00
15 Purchase 100 units @ $13.00
24 Sales 90 units @ $21.00
  • $2,980
  • $2,460
  • $2,850
  • $2,590
  • $5,440

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