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Question 1
In your audit of Tony Company, you find that a physical inventory on December 31, 2017, showed
merchandise with a cost of $400,350 was on hand at that date. You also discover the following items
were all excluded from the $400,350.
1. Merchandise of $63,540 which is held by Tony on consignment. The consignor is the Max Suzuki
Company.
2. Merchandise costing $39,530 which was shipped by Tony f.o.b. destination to a customer on
December 31, 2017. The customer was expected to receive the merchandise on January 6, 2018.
3. Merchandise costing $43,150 which was shipped by Tony f.o.b. shipping point to a customer on
December 29, 2017. The customer was scheduled to receive the merchandise on January 2, 2018.
4. Merchandise costing $90,100 shipped by a vendor f.o.b. destination on December 30, 2017, and
received by Tony on January 4, 2018.
5. Merchandise costing $50,500 shipped by a vendor f.o.b. shipping point on December 31, 2017,
and received by Tony on January 5, 2018.
Based on the above information, calculate the amount that should appear on Tony’s balance sheet at
December 31, 2017, for inventory.
Inventory as on December 31, 2017
$
Question 2
Tamarisk Company sells one product. Presented below is information for January for Tamarisk
Company.
Jan. 1
4
Inventory
Sale
102 units at $5 each
81 units at $8 each
11
Purchase
158 units at $6 each
13
Sale
126 units at $9 each
20
Purchase
152 units at $6 each
27
Sale
98 units at $10 each
Tamarisk uses the FIFO cost flow assumption. All purchases and sales are on account.
(a)
Assume Tamarisk uses a periodic system. Prepare all necessary journal entries, including the endof-month closing entry to record cost of goods sold. A physical count indicates that the ending
inventory for January is 107 units. (If no entry is required, select "No entry" for the
account titles and enter 0 for the amounts. Credit account titles are automatically
indented when amount is entered. Do not indent manually.)
Date
Account Titles and Explanation
Jan. 31
SHOW LIST OF ACCOUNTS
Debit
Credit
Question 3
Larkspur Company was formed on December 1, 2016. The following information is available from
Larkspur’s inventory records for Product BAP.
Units
January 1, 2017 (beginning inventory)
Unit Cost
696
$ 6.00
January 5, 2017
1,392
7.00
January 25, 2017
1,508
8.00
February 16, 2017
928
9.00
March 26, 2017
696
10.00
Purchases:
A physical inventory on March 31, 2017, shows 1,856 units on hand.
(a)
Prepare schedule to compute the ending inventory at March 31, 2017, under FIFO inventory
method.
LARKSPUR COMPANY
COMPUTATION OF INVENTORY FOR PRODUCT
BAP UNDER FIFO INVENTORY METHOD
March 31, 2017
Units
Unit Cost
Total Cost
$
$
$
Question 4
Pharoah Company uses the LCNRV method, on an individual-item basis, in pricing its inventory items.
The inventory at December 31, 2017, consists of products D, E, F, G, H, and I. Relevant per unit data
for these products appear below.
Item D
Item E
Item F
Item G
Item H
Item I
$125
$114
$99
$94
$114
$94
Cost
78
83
83
83
52
37
Cost to complete
31
31
26
36
31
31
Selling costs
10
19
10
21
10
21
Estimated selling price
Using the LCNRV rule, determine the proper unit value for balance sheet reporting purposes at
December 31, 2017, for each of the inventory items above.
$
Item D
$
Item E
$
Item F
$
Item G
$
Item H
$
Item I
Question 5
Nash Company follows the practice of pricing its inventory at the lower-of-cost-or-market, on an
individual-item basis.
Cost
per Unit
Cost to
Replace
Estimated
Selling
Price
Cost of
Completion and
Disposal
Item
No.
Quantity
Normal
Profit
1320
1,400
$3.30
$3.09
$4.64
$0.36
$1.29
1333
1,100
2.78
2.37
3.61
0.52
0.52
1426
1,000
4.64
3.81
5.15
0.41
1.03
1437
1,200
3.71
3.19
3.30
0.26
0.93
1510
900
2.32
2.06
3.35
0.82
0.62
1522
700
3.09
2.78
3.91
0.41
0.52
1573
3,200
1.85
1.65
2.58
0.77
0.52
1626
1,200
4.84
5.36
6.18
0.52
1.03
From the information above, determine the amount of Nash Company inventory.
$
The amount of Nash Company’s inventory
Question 6
You are called by Tim Duncan of Sunland Co. on July 16 and asked to prepare a claim for insurance as
a result of a theft that took place the night before. You suggest that an inventory be taken
immediately. The following data are available.
Inventory, July 1
$ 36,800
Purchases—goods placed in stock July 1–15
84,000
Sales revenue—goods delivered to customers (gross)
107,900
Sales returns—goods returned to stock
3,600
Your client reports that the goods on hand on July 16 cost $28,400, but you determine that this figure
includes goods of $6,300 received on a consignment basis. Your past records show that sales are
made at approximately 30% over cost. Duncan’s insurance covers only goods owned.
Compute the claim against the insurance company. (Round ratios for computational purposes to
2 decimal places, e.g. 78.73% and final answer to 0 decimal places, e.g. 28,987.)
Claim against the insurance company
$
Question 7
Indigo Lumber Company handles three principal lines of merchandise with these varying rates of gross
profit on cost.
Lumber
25%
Millwork
30%
Hardware and fittings
40%
On August 18, a fire destroyed the office, lumber shed, and a considerable portion of the lumber
stacked in the yard. To file a report of loss for insurance purposes, the company must know what the
inventories were immediately preceding the fire. No detail or perpetual inventory records of any kind
were maintained. The only pertinent information you are able to obtain are the following facts from
the general ledger, which was kept in a fireproof vault and thus escaped destruction.
Lumber
Inventory, Jan. 1, 2017
Millwork
Hardware
$245,200
$91,400
$45,400
Purchases to Aug. 18, 2017
1,501,400
379,400
160,600
Sales to Aug. 18, 2017
2,060,700
507,000
189,000
Submit your estimate of the inventory amounts immediately preceding the fire. (Round ratios for
computational purposes to 5 decimal places, e.g. 78.74265% and final answers to 0 decimal
places, e.g. 28,987.)
Lumber
Millwork
Hardware
Inventory
$
$
$
Question 8
The records of Wildhorse’s Boutique report the following data for the month of April.
Sales revenue
$103,300
Purchases (at cost)
$52,100
Sales returns
2,200
Purchases (at sales price)
95,200
Markups
9,000
Purchase returns (at cost)
2,200
Markup cancellations
1,600
Purchase returns (at sales price)
3,200
Markdowns
9,500
Beginning inventory (at cost)
29,725
Markdown cancellations
3,100
Beginning inventory (at sales price)
50,100
Freight on purchases
2,600
Compute the ending inventory by the conventional retail inventory method. (Round ratios for
computational purposes to 0 decimal places, e.g. 78% and final answer to 0 decimal places,
e.g. 28,987.)
Ending inventory using conventional retail inventory
method
$
Question 9
Presented below is information related to Cheyenne
Company.
Beginning inventory
Purchases (net)
Cost
Retail
$ 54,010
$107,900
129,230
193,500
Net markups
10,281
Net markdowns
26,700
Sales revenue
174,520
Compute the ending inventory at retail.
Ending inventory
$
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Compute a cost-to-retail percentage under the following conditions. (Round ratios to 2
decimal places, e.g. 78.74%)
Cost-to-retail percentage
(1) Excluding both markups and markdowns.
%
(2) Excluding markups but including markdowns.
%
(3) Excluding markdowns but including markups.
%
(4) Including both markdowns and markups.
%
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Which of the methods in (b) above does the following?
(1)
Provides the most conservative estimate
of ending inventory.
(2)
Provides an approximation of lower-ofcost-or-market.
(3) Is used in the conventional retail method.
LINK TO TEXT
Compute ending inventory at lower-of-cost-or-market. (Round ratio to 2 decimal places, e.g.
78.74% and final answer to 0 decimal places, e.g. 6,225.)
Ending inventory
$
LINK TO TEXT
Compute cost of goods sold based on (d). (Round answer to 0 decimal places, e.g. 6,225.)
Cost of goods sold
$
LINK TO TEXT
Compute gross margin based on (d). (Round answer to 0 decimal places, e.g. 6,225.)
Gross margin
$