Connect - another Financial Accounting, Chapter 5

1.

Homestead Crafts, a distributor of handmade gifts, operates out of owner Emma Finn's house. At the end of the current period, Emma reports she has:

• 600 units (products) in her basement, 17 of which were damaged by water and cannot be sold.
• 190 units in her van, ready to deliver per a customer order, terms FOB destination.
• 190 units out on consignment to a friend who owns a retail store.

How many units should Emma include in her company's period-end inventory?

	Units in Ending Inventory: Units of Product on hand: 600 units Add: Units in transitselected answer correct 190selected answer correct Units on consignmentselected answer correct 190selected answer correct Less: Damaged unitsselected answer correct 17selected answer correct not attempted not attempted Total units in period-end inventory 963 units

----------------------------------------------------------------------------------- 2. Trey Monson starts a merchandising business on December 1 and enters into the following three inventory purchases. Also, on December 15, Monson sells 28 units for $10 each.   Purchases on December 7 18 units @ $4.00 cost Purchases on December 14 35 units @ $6.00 cost Purchases on December 21 28 units @ $7.00 cost Required: Monson uses a perpetual inventory system. Determine the costs assigned to the December 31 ending inventory based on the FIFO method. ----------------------------------------------------------------------------------- 3. Trey Monson starts a merchandising business on December 1 and enters into the following three inventory purchases. Also, on December 15, Monson sells 28 units for $10 each.  Purchases on December 7 18 units @ $4.00 cost Purchases on December 14 35 units @ $6.00 cost Purchases on December 21 28 units @ $7.00 cost Required: Monson sells 28 units for $10 each on December 15. Monson uses a perpetual inventory system. Determine the costs assigned to the December 31 ending inventory when costs are assigned based on LIFO. ----------------------------------------------------------------------------------- 4. Trey Monson starts a merchandising business on December 1 and enters into the following three inventory purchases. Also, on December 15, Monson sells 28 units for $10 each. Purchases on December 7 18 units @ $4.00 cost Purchases on December 14 35 units @ $6.00 cost Purchases on December 21 28 units @ $7.00 cost Required: Monson sells 28 units for $10 each on December 15. Monson uses a perpetual inventory system. Determine the costs assigned to ending inventory when costs are assigned based on the weighted average method. (Round your per unit costs to 2 decimal places.) ----------------------------------------------------------------------------------- 5. Trey Monson starts a merchandising business on December 1 and enters into the following three inventory purchases. Also, on December 15, Monson sells 28 units for $10 each.  Purchases on December 7 18 units @ $4.00 cost Purchases on December 14 35 units @ $6.00 cost Purchases on December 21 28 units @ $7.00 cost Required: Monson sells 28 units for $10 each on December 15. Of the units sold, 14 are from the December 7 purchase and 14 are from the December 14 purchase. Monson uses a perpetual inventory system. Determine the costs assigned to the December 31 ending inventory when costs are assigned based on specific identification. ----------------------------------------------------------------------------------- 6. Use the following information for the Exercises below. [The following information applies to the questions displayed below.]  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 190 units @ $ 7.00  = $ 1,330               Jan. 10   Sales                   150 units @ $ 16.00   Jan. 20   Purchase 110 units @ $ 6.00  =   660               Jan. 25   Sales                   130 units @ $ 16.00   Jan. 30   Purchase 280 units @ $ 5.50 =   1,540                     Totals 580 units         $ 3,530   280 units         The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 300 units, where 280 are from the January 30 purchase, 5 are from the January 20 purchase, and 15 are from beginning inventory. Required: 1. Complete the table to determine the cost assigned to ending inventory and cost of goods sold using specific identification. 2. Determine the cost assigned to ending inventory and to cost of goods sold using weighted average. 3. Determine the cost assigned to ending inventory and to cost of goods sold using FIFO. 4. Determine the cost assigned to ending inventory and to cost of goods sold using LIFO. ----------------------------------------------------------------------------------- 7. Use the following information for the Exercises below. [The following information applies to the questions displayed below.]   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 190 units @ $ 7.00  = $ 1,330               Jan. 10   Sales                   150 units @ $ 16.00   Jan. 20   Purchase 110 units @ $ 6.00  =   660               Jan. 25   Sales                   130 units @ $ 16.00   Jan. 30   Purchase 280 units @ $ 5.50 =   1,540                     Totals 580 units         $ 3,530   280 units          The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 300 units, where 280 are from the January 30 purchase, 5 are from the January 20 purchase, and 15 are from beginning inventory. Required: 1. Complete comparative income statements for the month of January for Laker Company for the four inventory methods. Assume expenses are $1,750, and that the applicable income tax rate is 40%. (Round your Intermediate calculations to 2 decimal places.) LAKER COMPANY Income Statements For Month Ended January 31 Specific Weighted Identification Average FIFO LIFO Sales $4,480selected answer correct $4,480selected answer correct $4,480selected answer correct $4,480selected answer correct Cost of goods sold 1,855selected answer correct 1,865selected answer correct 1,870selected answer correct 1,850selected answer correct Gross profit 2,625 2,615 2,610 2,630 Expenses 1,750selected answer correct 1,750selected answer correct 1,750selected answer correct 1,750selected answer correct Income before taxes 875 865 860 880 Income tax expense 350selected answer correct 346selected answer correct 344selected answer correct 352selected answer correct Net income $525 $519 $516 $528 2. Which method yields the highest net income? LIFO  Specific identification FIFO Weighted average 3. Does net income using weighted average fall between that using FIFO and LIFO? No Yes  4. If costs were rising instead of falling, which method would yield the highest net income? Specific identification Weighted average FIFO  LIFO ----------------------------------------------------------------------------------- 8. Martinez Company's ending inventory includes the following items. Product Units Cost per Unit Market per Unit Helmets 38 $ 60 $ 56 Bats 31 78 84 Shoes 52 97 101 Uniforms 56 42 42 Compute the lower of cost or market for ending inventory applied separately to each product. Per Unit Total Inventory Items Units Cost Market Cost Market LCM Applied to Items Helmets 38 $60 $56 $2,280selected answer correct $2,128selected answer correct $2,128selected answer correct Bats 31 78 84 2,418selected answer correct 2,604selected answer correct 2,418selected answer correct Shoes 52 97 101 5,044selected answer correct 5,252selected answer correct 5,044selected answer correct Uniforms 56 42 42 2,352selected answer correct 2,352selected answer correct 2,352selected answer correct $12,094 $12,336 $11,942 ----------------------------------------------------------------------------------- 9. Vibrant Company had $990,000 of sales in each of three consecutive years 2016–2018, and it purchased merchandise costing $545,000 in each of those years. It also maintained a $290,000 physical inventory from the beginning to the end of that three-year period. In accounting for inventory, it made an error at the end of year 2016 that caused its year-end 2016 inventory to appear on its statements as $270,000 rather than the correct $290,000.   Required: 1. Determine the correct amount of the company's gross profit in each of the years 2016–2018. 2. Prepare comparative income statements to show the effect of this error on the company's cost of goods sold and gross profit for each of the years 2016−2018.