GageUni

ver
sit
yCOLLEGE
DEPARTMENTOFACCOUNTI
NG
Mai
ntai
nInv
ent
oryRecodsI
ndi
vi
dualAssi
gnment(
15%)
I
.Tr
ueorFal
se
_
___
_1.Aphy
sical
inv
ent
oryshoul
dbet
akenatl
eastannual
l
yev
enwhenaper
pet
ual
inv
ent
orysy
stem i
sused.
_
___
2.Whengoodsar
eshi
ppedF.
O.B.shi
ppi
ngpoi
nt,
tit
lepossesonl
ywhent
hesel
l
err
ecei
vesf
ull
pay
ment
_
___
3.Anunder
stat
ementofEndi
ngI
nvent
orywi
l
lunder
stat
edcostgoodssol
dandov
erst
atedneti
ncomef
ort
hatper
iod
_
___
4.Theendi
ngi
nvent
oryunderaFI
FOper
iodi
cinv
ent
orysy
stem i
sthesameasunderaFI
FOper
pet
ual
Inv
ent
orysy
stem.
I
I.Mul
ti
pleChoi
ces
_
___
1.Val
uat
ionofi
nvent
ori
esr
equi
rest
hedet
ermi
nat
ionofal
loft
hef
oll
owi
ngexcept
.
A.Thecoststobei ncl
udedininvent
ory
B.Thephysicalgoodstobeincludedini
nv entor
y
C.Thecostofgoodshel donconsignmentf rom ot
hercompani
es.
D.Thecostflowassumpt i
ontobeadopt ed.
_
___
2.Theendi
ngi
nvent
oryofNar
ramor
eCompanyi
sunder
stat
edi
nyearonebyBr
.20,
000.Thi
ser
rori
snotcor
rect
ed
i
nyearoneori
nyeart
wo.Whati
mpactwi
l
lthi
ser
rorhav
eont
otal
neti
ncomef
ory
earone.
A.Noef
fectont
otal
neti
ncomef
ort
het
woy
ear
s
B..
Over
stat
etot
ali
ncomebyBr
.20,
000
C.Under
stat
etot
ali
ncomebyBr
.20,
000
D.Ov
erst
ateneti
ncomef
ory
earonebyBr
.20,
000andy
eart
wobyBr
.20,
000
_
___
3.Whi
choft
hef
oll
owi
ngi
nvent
orymet
hodscomescl
osestt
ost
ati
ngendi
ngi
nvent
oryatr
epl
acementcost
?
A.FI
FO B.LI
FO C.Wei
ght
ed-
aver
age D.ALL
_
___
_4.TheuseofLI
FOunderaper
pet
ual
inv
ent
orysy
stem (
uni
tsandcost
s):
A.Mayy
iel
dahi
gheri
nvent
oryv
aluat
iont
hanLI
FOunderaper
iodi
cinv
ent
orysy
stem whenpr
icesar
efal
l
ing.
B.Mayy
iel
dahi
gheri
nvent
oryv
aluat
iont
hanLI
FOunderaper
iodi
cinv
ent
orysy
stem whenpr
icesar
eri
sing.
C.Al
way
syi
eldst
hesamei
nvent
oryv
aluat
ionanLI
FOunderaper
iodi
cinv
ent
orysy
stem.
D.Cannev
ery
iel
dthesamei
nvent
oryv
aluat
ionasLI
FOunderaper
iodi
cinv
ent
orysy
stem.
_
___
5.Thepur
chaseofi
nvent
oryi
temsonaccountusi
ngt
heper
pet
ual
inv
ent
orymet
hod:
A.Decreasewor kingcapitalandthecur r
entratio
B.Hasnoef fectonwor ki
ngcapitalbutdecreaset hecurr
entrati
o
C.Hasnoef fectont hecur r
entrati
obutdecr easeswor ki
ngcapital
D.Hasnoef fectonwor ki
ngcapitalorthecurrentrati
o
_
___
6.Inperiodsofrisingprices,useofLIFOr atherthantheFIFOinventorymethodwi
l
lmostl
i
kel
yhav
e
whatef
fectont hef ol
lowingitems?
NetIncome CostofGoodsSol d WorkingCapi t
al
A. Hi gher Lower Lower
B. Lower Hi
gher Lower
C. Higher Hi
gher Higher
D. Lower Hi
gher Higher
 _
___
7.Goldstei
nCo.
,i
scl
othi
ngst
oreusesr
etai
li
nvent
orymet
hod.Thef
oll
owi
ngr
elat
est
o1993
oper
ati
ons:
I
nventory,January1, 1993, atcost……………. .
Br.14,200
I
nventory,January1, 1993, atsalespri
ce………. Br.20,100
Purchasesi n1993atcost ……………………. .…Br.32,600
Purchasesi n1993atsal espr ice…………………Br .50,000
Sal
esofi tems……………………………. .
…….Br.60,.
000
Thecostoft heDec.31, 1993invent or
ydet erminedbyt heconventionalr
etailmethodis:
A.Br
.9, 800 B.Br .6,375 C.Br.6,743 D.Br.6,543
_
__8.Underr
etaili
nventor
ymet hod,purchasereturnsandall
owancear enormal
lyconsi
deredareducti
onof
pr
iceat
Cost Retai
l
A No No
B No Yes
C Yes No
D Yes Yes
_
__9.Thefoll
owingper t
ainstoaninv entoryit
em:
Cost
……………………………………. .
….Br.60
Est
imatedSelli
ngpriceofdi sposal…………. .
Br.68
Est
imatedcostofdisposal ………………. .
……Br .1
Repl
acementcost ……………………………. Br.51
Undert
hel ower-
of-cost-
or-
mar ketrule,t
hisinventor
yitem i
sval
uedat:
a)Br.51 b)Br.56 c)Br.60 d)Br
.67 e)someot
heramount

ABCCompanyshi
ppedi
nvent
oryi
temst
hatcostBr
.100t
oXYZCompany(
Consi
gnee)onJanuar
y10,
1990and
t
heconsi
gnedgoodsar
eunsol
dti
l
lDecember31,
1991.Howev
erABCCompanyr
ecor
dedt
hesei
temsasasal
e
byBr
.110onJanuar
y10,
1990(
ont
hedat
eofshi
pmentt
otheconsi
gnee)
.(Di
sregar
dincomet
ax)
.
Answerquest
ionno.10and11basedont
heabov
einf
ormat
ion
_
___10.Whati
stheef f
ectoftheerroront hefi
nancialstatement
sofABCCompanypr eparedfor1990?
A.Overstatementofcostofgoodssol dbyBr .10
B.OverstatementofnetincomebyBr .10
C.OverstatementofcurrentassetsbyBr .10
D.Overstatementofgrossprof i
tbyBr.110
E.Alloft
heabov e
___
_11.Whati
stheef f
ectoftheerroronthef i
nancialstatement
sofABCCompanypr eparedfor1991.
A.OverstatementofnetincomebyBr .10 C.Thecapi
talaccounti
scor r
ect E.Al l
B.UnderstatementofcurrentassetsbyBr .100 D.Thenetincomei scorr
ect F.A&C
Basedont hedatagi venbelow t
akenfr
om thei ncomest atementcolumnsoft hewor ksheetofa
merchandisingbusinessprepar
edfort
heyearendedDecember31, 2002.Answerquest
ions12–14.
NetI ncome Br.12,500
Sales 45,000
IncomeSummar y 10,000Dr .and6,000Cr.
GrossPur chase 19,750
PurchaseRet .&Allowances 200
PurchaseDi scount 50
_
___
12.Whati
sthet
otal
costofgoodssol
dfort
hey
ear
?
A.Br
.69,
500 B.Br
.89,
250 C.Br
.23,
500 D.Br
.57,
000 E.none
_
___
13.Whati
stheamountoft
otal
oper
ati
ngexpenses?
A.Br
.9,
000 B.Br
.32,
5000 C.Br
.21,
500 D.Br
.36,
000 E.none
_
___
14.Whati
stheamountofgr
osspr
ofi
tfor
tthey
ear
?
A.
Br.9000 B.Br
.21,
500 C.Br
.23,
500 D.Br
.25,
000 E.none
Mai
ntai
nInv
ent
oryRecodsGr
oupAssi
gnment(
20%)

PARTI
II
.Exer
cise
1.Dext
erCompanysel
l
s wat
erbees.The per
pet
uali
nvent
orybal
ance was Br
.19,600 i
nthe
account
ingr
ecor
dsonDecember32,y
ear4.Someev
ent
sthatoccur
redneart
heendAy
ear4ar
e
l
i
stedbel
ow:
A.Bedsshi
ppedt
oacust
omeronJanuar
y2,y
ear5,cost
ingBr
.2,000,wer
eincl
udedi
ninv
ent
oryon
December31,
year4.Thesal
ewasr
ecor
dedi
ntear5.
B.Bedscost
ingBr
.9,
000r
ecei
vedonDec.30,
year4,
wer
erecor
dedashav
ingbeenr
ecei
vedonJanuar
y2,
y
ear5.
C.Be4dsr
ecei
vedcost
ingBr
.1,
900wer
eent
eredt
wicei
ntheper
pet
ual
inv
ent
oryr
ecor
d.
D.Bedsshi
pped“
FOBshi
ppi
ngpoi
nt”onDec.28,y
ear4,whi
chcostBr
.8,000wer
enotr
ecor
dedasasal
e
byDext
eruni
tJanuar
y3,
year5.Thebedswer
eincl
udedi
ntheendi
ngi
nvent
ory
.
E.Bedsonhandt
hatcostBr
.2,
300wer
enotent
eredi
ntheaccount
ingr
ecor
dsi
nyear4.
Requi
red Pr
epar
eawor
kingr
arershowi
ngt
hecor
rectamountofDext
erCompany
’si
nvent
oryonDec.31,
year
4.
2.NovelCompanyr eport
edBr .140,000ofi nv
ent oryonDecember31,2002,basedonaphy si
cal
count.Additi
onalinfor
mat i
on:
a)Includedint hephy sicalcountwer emachi nesbill
edt oacost umerFOBshi ppi
ngpointon
December31, 2002.Thesemachi neshadacostofBr .
,6,000andhadbeenbil
ledatBr
.10,000.
TheshipmentwasonNov el
loadingdockwai tingt
obepi ckedbythecar
ri
er.
b)Goodswer eintransitfrom av endortoNov el.TheinvoicecostwasBr.16,000andthegoods
wereshippedFOBshi ppingpointonDecember29, 2002.
c) Goodsoutonconsi
gnmentamountSal
est
oBr
.9,200&shi
ppi
ngcost
s,Br
.240.(
Grossmar
gini
s15%
oncost
)
Requir
ed:Computethecor rectamountofendi ngInv
entor
yforNov elCompany .
3.Stati
onersCompanyhad200cal culat
or sonhandonJanuar y1,y ear9,andcost ingBr.18each.
Purchasesandsal
esofcalculat
or sduringthemonthofJanuary,
year9, wereasf ol
lows:
Date Purchases Sales
Jan.12………………………………………………………. [email protected]
14………………………………100@Br .20
29………………………………100@Br .22
30………………………………………………………. [email protected]
Astat
ionerdoesnotmaint
ainperpetualinventoryr
ecor
ds.Accordi
ngtophy sicalcount,
150calcul
ator
s
wereonhandonJan.31, y
ear9.Comput ethecostofStati
onersCompany ’
sJan.31, year9,i
nvent
ory
under
 (
A)TheFI
FOmet
hod,
and (
B)TheLI
FOmet
hodAi
nvent
oryv
aluat
ion.
4.TheCompanyhadt hef ol
lowinginventorytr
ansacti
onsi n2003:
Date Tr ansactions Unit
s CostperUni t
Jan1, 2003 Bal ance 50 Br.30
Feb14 Sal e 25
May23 Pur chase 100 Br.40
Aug.21 Sal e 50
Nov .5 Pur chase 25 Br.60
Nov .18 Sal e 95
Required:Comput et hecostofgoodssol dandt heendi nginv entoryusingthefoll
owi
ngPer i
odi
cand
Perpetual systemsundereachmet hod
a.FI FO
b.FI FO
c.Av erage
5.Jan1.Begi nningI nv entory 180Uni tsatBr .40each
Pur chase:
Jan.7 120Uni tsatBr .50each
Jan.17 100Uni tsatBr .60each
Sales:
Jan.10 140Uni ts
Jan. 19 40Uni ts.
Required:Comput et hecostofgoodssol dandt heendi nginv entoryusingthefoll
owi
ngPer i
odi
cand
Per pet ual systemsundereachmet hod
a.FI FO
b.FI FO
c.Av er age
6.OnJanuar y1t heBeaCompanybeganbusi nesswi t
hepur chaseof250Uni tsofi
nventoryf
orBr.
225, 000.Dur i
ngt hemont hBeahadt hefoll
owi nginventoryt ransacti
ons.
Date
Janu- 6-pur chased50Uni tsatBr.1, 000perUni ts.
11.Sol d220unt is
17.Sol d60uni ts.
24.Pur chase80uni t
satBr .1,250peruni t
.
28.Sol d80uni ts
30.Pur chased200uni t
satBr .1,100peruni t
Requi red:Comput ethecostofgoodssol dandcostoft heinventoryatt
heendofi nvent
oryat
theendofJanuar yundert hefoll
owinginv ent
orycost ingmet hods.

7.Answereachquestionsbelowbyinser
ti
ngoneoftheseabbrevi
ationsi
nthespacepr
ovi
ded:
(
SI)Specifi
cIdenti
fi
cat
ion (
FIFO)fi
ri
st-
in,
fir
st-out
(
WA)Wei ghtedaverage (
LIFO)Last-
in,Fi
rst
-out
_
__1.Whi
chinv
entorycostmet
hodbestmat chescur r
entcostswi thcurrentrev
enuesont heincomest at
ement
.
_
__2.Whi
chinv
entorycostmet
hody i
eldst
hemostr eal
isti
cinventoryamountcompar edtor eplacementcost,
_
__3.Whi
chmethodi
sbasedont
heassumpti
oninvent
oryflowis“mixed"&theref
ore“mi
xesal
lacquisi
tionpr
ices?
4.Fr
om theabov
efourmet
hodwhi
choney
iel
dsf
olowi
ngr
esul
tsDuri
ngaperi
odoft
hetwoeconomicsi
tuat
ions
Events Ri
singpr
ices decl
ini
ngpri
ce
 Lowestnetincomef i
gure? ____
______
______ ____
______
_____
 Lowestamountf ori
nventor
yont hebalancesheet
? ___
______
______
_ ___
______
______
 Lowestcostofgoodssol dfigur
e? _
______
______
___ _
______
______
__
 Lowestowner s'
equit
yf i
gure? __
______
______
__ __
______
______
_
 Lowesti
ncomet axbill
forthecurrenty
ear? __
______
______
__ __
______
______
_
8.Considerthef oll
owi ngdat aforABCt radi
ngcompanyf ort hemont hendedSene30,1993.[ Thi
s
dataar ecopiedf r
om Act ivi
ty6.Youneedt ocompar et heansweroft hi
sact i
vi
tywi t
hthatof
Activi
ti
es6and7] .
Date Pur chases Sol
duni ts
Sene1, 1993 2,000uni t
s@Bi rr16 nosales
Sene5, 1993 3,000uni t
s@Bi rr18 nosales
Sene12, 1993 nopur chases 4,
000uni t
s
Sene20, 1993 3,000uni t
s@Bi rr19 nosales
Sene27, 1993 nopur chases 2,
000uni t
s
Required:
1.Comput ecostofendi nventoryinunits&i nBir
rusingWei ghtedAver
agemet hodunder
peri
odicinventorysystem.
2. Preparethel edgercardt hatshowst hemov ementofuni t
sandaccountbalanceusing
WeightedAv eragemet hodunderper petualinv
entorysy stem.
9. ABCCompanyusesaper iodicinventor
ysy stem andhadt hef ol
l
owingbegi
nninginvent
oryand
purchasesdur i
ngt hemont hHaml e,1992f orit
em X.
Date Uni
ts unitcost
Haml
e1, 1992 Begi
nninginvent
ory 400 Birr14
Haml
e10, 1992 Purchases 200 Bir
r15
Haml
e19, 1992 Purchases 300 Bir
r16
Haml
e22, 1992 Purchases 250 Bir
r20
Haml
e28, 1992 Purchases 100 Bir
r21
AsofHaml e30,
1992,ther
ewer e550uni
tsofXonhand.Saleofuni
tswer
easf
oll
ows:
Hamle12,1992 200unit
satBir
r30
Hamle20,1992 200unit
satBir
r30
Hamle25,1992 300unit
satBir
r35
Requi
red:
i
. Cal
culatet
hecostofgoodsav
ail
abl
eforsal
esand
i
i
. Undertheper
iodi
cinv
entor
ysyst
ems,computet
hecostofendi
nvent
ory
,C.
G.S,
andgr
osspr
ofi
tusi
ng:
A.FI FOmet hod
B.LI FOmet hod
C.Thewei ghtedaver
agemet hod.
10.Cry st
al Corpor
ation’
sendinginventor
yincludesthefol
lowi
ngi t
ems.
Product Unitsonhand Unitcost Repl acementcostperuni
t
W 40 Br.30 Br.34
X 50 48 40
Y 60 26 24
Z 44 20 20
Calculatelowerofcostormar ketfortheinventor
yAs
A.Whol e
B.Appli
edsepar atel
ytoeachproducts
C.Bymaj orgroup
11.Thef oll
owinginformat i
onrel
atestocommodi t
yofwill
i
ngcompanyf ort
hemont hofJanuar
y:
Inv
entory,Jan.1……………………………………………. .
100uni t
s@Br .5
Purchases……………………………………400uni ts@Br.
6;100unit@Br .7
Inv
entory,Jan.31…………………. 200uni
ts
A.Comput et he bal
ance ofwil
li
ng company’
s January 31,i nventor
y underFIFO costfl
ow
assumption.
B.Comput ewill
ingCompany’
scostofgoodssol
df orJanuaryunderLIFOcostflowassumpti
on
12.
SeeleyCompanyusesthegr
ossprof
itmet
hodtoesti
mat
emonthl
yinv
entori
es.I
nrecentmont
hs
grossprofi
thasaver
aged35% ofnetsal
es.Thefol
l
owi
ngdat
aar eavai
labl
eforthemonthof
January
,year9:

I
nv entori
esJan.1,year9………………………………Br .26,590
Purchases…………………………………………. .…….120,000
Purchasesr et
urns……………………………………………5, 000
Freight-i
n………………………………………………. ..
….6,000
Grosssal es………………………………………………. .169,000
Salesr et
urnsandall
owances………………………………10, 000
Requi
red:
-Comput
etheest
imat
edcostofSeel
erCompany
’si
nvent
ori
esonJan.31,y
ear9byt
hegr
osspr
ofi
t
method.

13.Youar eprov i
dedwiththefoll
owi ngdatafrom t
her ecor
dsoft
hreemer chandi
singcompani
es:
(a)
,(b)&(
c).
Deter mineeachoft hemi ssingnumber sforeachcompany .
a b c
I
nv oicecostofmer chandisepur chase Br.90, 000 Br
.40,000 Br .
30, 500
Purchasedi scounts 4000 ? 650
Purchaser eturnsandal l
owances 3,000 1,
500 1,100
Transpor t
ati
on- I
n ? 3,
500 4, 000
Mer chandiseinventory(beginningofper iod) 7, 000 ? 9,000
Total costofmer chandisepurchases 89, 400 39,
500 ?
Mer chandiseinventory(endofper iod) 4,400 7,
500 ?
Costofgoodssol d ? 41,
600 34, 130