Review 02/08
Problem 1
A company uses a periodic inventory system. At the end of the annual accounting period, December 31, the accounting records provided the following information for a product.
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Units
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Unit Cost
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Inventory, December 31 Year 1
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2,000
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$4
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For the current year:
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Purchase , April 11
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5,000
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$6
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Purchase, June 1
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3,000
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$9
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Inventory, December 31 Year 2
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4,000
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Compute ending inventory and cost of goods sold under FIFO, LIFO, and average cost inventory costing methods.
Problem 2
A company uses the FIFO inventory costing method and has a perpetual inventory system. All purchases and sales were cash transactions. The records reflected the following for January.
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Units
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Unit Cost
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Beginning Inventory
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100
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$1.50
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Purchase, January 4
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200
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$1.10
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Sale, January 18 at $2.20 per unit
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110
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Purchase, January 22
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100
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$1.60
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Sale, January 28 at $2.40 per unit
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170
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Determine the cost of goods available for sale, the ending inventory, and the cost of goods sold. Then create the journal entries for January 4 and 18.
Problem 3
A company just completed a physical inventory count at year-end, December 31. Items were counted and costed on a FIFO basis. The inventory amounted to $40,000. The following information was not included in the inventory amount.
(a) Goods costing $600 were being used by a customer on a trial basis.
(b) A customer purchased goods for cash amounting to $2,650, but the amounts were not delivered until the next year. The cost of the goods for the company were $1,300, and that amount was included in the physical inventory count.
(c) Goods that have not arrived by December 31 from a supplier amounted to $4,550 with the terms FOB shipping point.
(d) The company shipped $600 worth of goods to a customer, FOB destination. The goods are expected to arrive in January of the next year.
Begin with the $40,000 inventory amount and adjust the ending inventory using the additional items. Assume that the company’s accounting policy requires including in inventory all goods for which it has title (ownership). Use the fact that the change in title (ownership) is determined by the shipping.
