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TRUE/FALSE 1. 2. 3. 4. 5. 6. 7.

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Companies determine the number of units from perpetual inventory records backed up by a physical count. FIFO and LIFO inventory costing methods are exact opposites of each other. When using a perpetual inventory system, a business will debit inventory and credit cost of goods sold each time a sale is recorded. With the increased availability of relatively inexpensive accounting software, many businesses have switched to perpetual inventory systems. If a perpetual inventory system is used, cost of goods sold appears on the balance sheet. Under the FIFO method, ending inventory is valued based on the most recent purchases. When prices are rising, LIFO generally results in the lowest taxable income, and therefore helps reduce taxes paid.

8. FIFO will report the lowest cost of goods sold on the income statement when prices are falling. 9. LIFO results in a more accurate portrayal of ending inventory on the balance sheet than does FIFO. 10. LIFO matches cost of goods sold to sales on the balance sheet better than FIFO. 11. When prices are falling, the LIFO method results in the lowest taxable income and thus the lowest income taxes. 12. The LIFO method can result in misleading inventory costs on the balance sheet because the oldest prices are left in ending inventory. 13. In a periodic inventory costing system, cost of goods available for sale divided by the number of units available for sale equals the unit cost at the beginning of the period. 14. Under a periodic inventory costing system, companies continually record cost of goods sold. 15. The lower-of-cost-or-market rule is a good example of conservatism in accounting. 16. When applying LCM rules to ending inventory valuation, market value generally refers to the company's current selling price for its inventory. 17. Understating beginning inventory in the current year will understand cost of goods sold in the current year. 18. Understating beginning inventory in 20X5 will overstate net income for 20X6.

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19. Overstating ending inventory in 20X5 will overstate net income for 20X6.

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20. The gross profit method is an estimate of inventory used to estimate losses for insurance claims due to a fire or natural disaster. MULTIPLE CHOICE 21. A perpetual inventory system offers all the following advantages except: a) it is less expensive than a periodic system b) inventory balances are always current c) it helps salespeople determine whether there is a sufficient supply on hand to fill customer orders d) it enhances internal control 22. A perpetual system: a) keeps a running record of all goods b) may be used for all types of goods c) is used only for inexpensive goods d) both a and b are correct 23. Inventory is classified as a: a) fixed asset on the balance sheet b) current asset on the balance sheet c) current liability on the balance sheet d) as either an investment or a current asset on the balance sheet 24. The inventory system that continually discloses the amount of inventory on hand is called: a) perpetual b) periodic c) physical d) specific identification

25. If a company uses a perpetual inventory system, which of the following entry or entries are required to record the sale of merchandise on credit? a) Accounts Receivable Sales Revenue b) Cost of Goods Sold Purchases c) Cost of Goods Sold Inventory d) both a and c are necessary entries Table 1 Assume the following data for Burnette Company for 20X5: Beginning inventory 10 units at $7 each March 18 purchase 15 units at $9 each April 5 sale 12 units

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June 10 purchase September 15 sale October 30 purchase 20 units at $10 each 30 units 12 units at $11 each

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26. Refer to Table 1. Under the perpetual LIFO method, ending inventory would be valued at: a) $165 b) $105 c) $153 d) $135 27. Referring to Table 1, under the perpetual FIFO method, cost of goods sold on the income statement would be: a) $294 b) $375 c) $462 d) $420 28. Referring to Table 1, under the perpetual LIFO method, cost of goods sold on the income statement would be: a) $384 b) $294 c) $389 d) $420 29. Which of the following inventory costing methods requires a company to keep track of the actual movement of individual inventory items? a) LIFO b) average cost c) FIFO d) specific unit cost Table 2 Assume the following data for Smithsonian Company for 20X5: Beginning inventory 10 units at $70 each March 18 sale 8 units June 10 purchase 20 units at $80 each October 30 sale 15 units 30. Refer to Table 2. Under the perpetual FIFO method, ending inventory would be valued at: a) $540 b) $480 c) $560 d) $590

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31. Referring to Table 2, under the perpetual FIFO method, cost of goods sold on the income statement would be: a) $1,700 b) $1,740 c) $560 d) $2,000 32. Referring to Table 2, under the perpetual average cost method, cost of goods sold on the income statement would be: a) $1,186 b) $1,600 c) $560 d) $1,746 33. Referring to Table 2, under the perpetual average cost method, ending inventory on the balance sheet would be: a) $560 b) $554 c) $1,740 d) $700 34. Referring to Table 2, under the perpetual LIFO method, cost of goods sold on the income statement would be: a) $1,760 b) $540 c) $1,700 d) $1,186 35. Referring to Table 2, under the perpetual LIFO method, ending inventory on the balance sheet would be: a) $540 b) $560 c) $1,140 d) $1,170 36. During a period of rising prices and using a perpetual inventory costing system, LIFO will yield: a) less net income than would FIFO b) less cost of goods sold than would average costing c) higher gross profit than would FIFO d) less operating expenses than would FIFO During a period of rising prices and using a perpetual inventory costing system, FIFO will yield: a) less net income than would FIFO b) less operating expenses than would FIFO c) higher gross profit than would FIFO d) higher cost of goods sold than would average costing

37.

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38.

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During a period of steady prices and using a perpetual inventory costing system, LIFO will yield: a) less net income than would FIFO b) less cost of goods sold than would average costing c) higher gross profit than would FIFO d) approximately the same net income as would FIFO During a period of falling prices and using a perpetual inventory costing system, FIFO will yield: a) higher net income than would FIFO b) higher operating expenses than would FIFO c) less gross profit than would FIFO d) less cost of goods sold than would average costing During a period of falling prices and using a perpetual inventory costing system, LIFO will yield: a) higher net income than would FIFO b) less operating expenses than would FIFO c) less gross profit than would FIFO d) higher cost of goods sold than would average costing

39.

40.

41. All of the following are reasons for choosing the LIFO method versus the FIFO method except: a) LIFO reports the most up-to-date inventory values on the balance sheet b) LIFO uses more current costs in calculating cost of goods sold c) LIFO allows owners and managers to manage reported income d) LIFO generally results in lower income taxes paid 42. When prices are rising, the ending inventory balance reported on a LIFO basis is generally: a) equal to ending inventory reported on a FIFO basis b) greater than on a FIFO basis c) lower than on a FIFO basis d) equally likely to be higher or lower on a LIFO basis as opposed to a FIFO basis 43. When prices are falling, the ending inventory balance reported on a LIFO basis is generally: a) lower than on a FIFO basis b) greater than on a FIFO basis c) equal to ending inventory reported on a FIFO basis d) equally likely to be higher or lower on a LIFO basis as opposed to a FIFO basis 44. When prices are falling, the cost of goods sold reported on the income statement on a LIFO basis is generally: a) equally likely to be higher or lower on a LIFO basis as opposed to a FIFO basis b) greater than on a FIFO basis c) equal to ending inventory reported on a FIFO basis d) lower than on a FIFO basis 45. Which of the following statements is false?

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a) b) c) d)

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Average cost is an acceptable costing method in virtually all countries. FIFO is an acceptable costing method in virtually all countries. LIFO is an acceptable costing method in virtually all countries. Other countries are not bound by American tax laws or accounting practices.

46. When the LIFO method of inventory valuation is used, cost of goods sold is assumed to consist of the: a) most recently purchased units b) most expensive units c) least expensive units d) oldest units 47. Which of the following statements is generally true when prices are rising? a) LIFO produces taxable income that exceeds taxable income of FIFO. b) FIFO results in less taxes than LIFO. c) The use of LIFO will result in less taxes than FIFO. d) Managers will use LIFO if they want to maximize income reported to shareholders. Table 3 Assume the following data for Blaylock Company for 20X5: Beginning inventory 10 units at $70 each March 18 purchase 25 units at $75 each April 15 sale 30 units June 10 purchase 30 units at $80 each October 30 purchase 22 units at $83 each November 15 sale 40 units 48. Refer to Table 3. Under the perpetual LIFO method, cost of goods sold would be valued at: a) $3,275 b) $5,300 c) $5,491 d) $5,276 49. Referring to Table 3, under the perpetual FIFO method, cost of goods sold on the income statement would be: a) $5,390 b) $5,351 c) $5,491 d) $5,276 50. Referring to Table 3, under the perpetual average cost method, cost of goods sold on the income statement for the April 15 sale would be: a) $70 per unit b) $75 per unit c) $72.50 per unit d) $73.57 per unit

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51. Given the following data, what is cost of goods sold under a periodic inventory system? Sales revenue $950,000 Beginning inventory 150,000 Ending inventory 230,000 Purchases a) b) c) d) 52. In a a) b) c) d) $640,000 $870,000 $570,000 $510,000 periodic inventory system, the quantity of ending inventory is determined by: subtracting units sold from units purchased a physical inventory count looking at the balance in the inventory account subtracting cost of goods sold from the beginning inventory balance

720,000

53. If a company is using a periodic inventory system, the balance in its inventory account three-quarters of the way through an accounting period would be equal to the: a) inventory on hand at the beginning of the period b) amount of inventory on hand at that date c) total of the beginning inventory plus goods purchased during the accounting period d) amount of goods purchased during the period 54. Beginning inventory plus net purchases minus ending inventory equals: a) gross profit b) cost of goods available for sale c) cost of goods sold d) gross profit Table 4 Austin Company uses a periodic inventory system. Assume the following data for 20X5: Beginning inventory 10 units at $7 each March 18 purchase 15 units at $9 each June 10 purchase 20 units at $10 each October 30 purchase 12 units at $11 each On December 31, a physical count reveals 15 units in ending inventory. 55. Refer to Table 4. Under the LIFO method, ending inventory would be valued at: a) $165 b) $105 c) $115 d) $135

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56. Referring to Table 4, under the FIFO method, cost of goods sold on the income statement would be: a) $294 b) $462 c) $375 d) $420 57. Referring to Table 4, under the average cost method, cost of goods sold on the income statement would be: a) $420 b) $294 c) $389 d) $396 58. Given the following data, what is the average cost cost of ending inventory rounded to the nearest whole dollar? Sales revenue 100 units at$10 per unit Beginning inventory50 units at$ 8 per unit Purchases 90 units at $ 9 a) b) c) d) $400 $360 $1,210 $346

per unit

59. Given the following data, what is the gross profit if cost of goods sold is determined using the FIFO method? Sales revenue 200 units at$20 per unit Beginning inventory60 units at$12 per unit Purchases 210units at $13 per unit a) b) c) d) $1,460 $2,540 $1,400 cannot be determined because the number of units in ending inventory is not given

60. Given the following data, what is the gross profit if cost of goods sold is determined using the LIFO method? Sales revenue 200 units at$20 per unit Beginning inventory60 units at$12 per unit Purchases 210units at $13 per unit a) b) c) $2,600 $1,400 $1,460

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d) $1,600

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61. Given the following data, what is the gross profit if cost of goods sold is determined using the average cost method? Sales revenue 200 units at$20 per unit Beginning inventory60 units at$12 per unit Purchases 210units at $13 per unit a) b) c) d) Table 5 January 1 inventory balance 90 March 2 purchase 50 July 8 purchase 80 November 15 purchase 30 December 31 inventory balance 75 units units units units units at at at at $10 $11 $10 $12 per per per per unit unit unit unit $2,556 $1,444 $2,500 $1,500

62. Referring to Table 5, the cost of ending inventory using the periodic LIFO method would be: a) $1,910 b) $860 c) $750 d) $850 63. Referring to Table 5, cost of goods sold calculated under the periodic FIFO method would be: a) $1,800 b) $2,160 c) $1,910 d) $1,850 64. Referring to Table 5, assuming all goods are sold throughout the year for $17 per unit, gross profit calculated under the periodic FIFO method would be: a) $1,210 b) $1,175 c) $1,150 d) $900 65. Referring to Table 5, assuming all goods are sold throughout the year for $19 per unit, gross profit calculated under the periodic LIFO method would be: a) $1,465 b) $1,510 c) $1,260

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d) $1,570

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66. Which statement addresses the consistency principle? a) Businesses should generally use the same accounting methods and procedures from one period to the next. b) Financial reporting practices in one country should be consistent with those in other countries. c) Companies in the same industry must use the same inventory costing method to facilitate comparison of results. d) Once a company selects an inventory costing method, it must always use that method. 67. Which of the following statements is true about a company making an accounting change in its financial statements? a) It is generally entitled to make one accounting change per year. b) It must disclose the effect of the change on net income. c) Companies can never make accounting changes because of the consistency principle. d) It must petition the Financial Accounting Standards Board for permission to make the change. 68. LIFO tends to decrease taxes when: a) costs are declining b) costs are constant c) costs are increasing d) LIFO will always yield the lowest possible taxes 69. An item is considered material if: a) it facilitates comparison with the financial statements of another company in the same industry b) its inclusion in the financial statements would cause a statement user to change a decision c) its dollar value is greater than 10% of net income d) it is accounted for using a treatment that is not normally allowed by generally accepted accounting principles 70. If a company uses LIFO and prices are rising, large purchases of inventory near the end of the year will: a) reduce cost of goods sold b) increase income taxes paid c) reduce the gross profit d) have no effect on the amount of cost of goods sold 71. Using the lower-of-cost-or-market rule of valuing inventory allows the accountant to attain: a) consistency b) matching c) conservatism d) full disclosure

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72. If the cost of an item of inventory is $80, the current selling price is $100, and the current replacement cost is $75, the amount shown in inventory on the balance sheet under the lower-of-cost-or-market rule is: a) $75 b) $80 c) $100 d) $75 or $80 73. Ending inventory for Commodity X consists of 20 units. Under the FIFO method, the cost of the 20 units is $5 each. Current replacement cost is $4.50 per unit. Using the lower-of-costor-market rule to value inventory, the balance sheet would show ending inventory of: a) $5.00 b) $4.75 c) $90 d) $100.00 74. Music Unlimited had six CD players in inventory on December 31. They were purchased in November for $170 each. A quoted price received from the supplier on December 31 shows the CD players now cost $175 each. Music Unlimited has marked each player to sell for $320. Using the lower-of-cost-or-market rule, the ending inventory of CD players should be shown at: a) $1,020 b) $1,920 c) $1,050 d) none of the above 75. For the current year, Hodges Department Store reported the following data: Goods available for sale December 31, inventory balance $1,074,450 85,430

The current replacement cost of inventory on balance sheet date is $91,730. Using the lower-of-cost-or-market rule, what is cost of goods sold for Hodges Department Store? a) $897,290 b) $982,720 c) $989,020 d) impossible to determine from the given data 76. Given the following data: Ending inventory at cost $23,600 Ending inventory at current replacement cost24,000 Cost of goods sold (before consideration of LCM rule) 37,000 Which of the following depicts the proper account balance after the application of the LCM rule? a) Ending inventory will be $24,000.

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b) c) d) Cost of goods sold will be $36,400. Cost of goods sold will be $37,400. Ending inventory will be $23,600.

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77. Inventory at the end of the current year is overstated by $20,000. What effect will this error have on the following year's net income. a) Net income will be overstated $20,000. b) Net income will be understated $20,000. c) Net income will be correctly stated. d) Net income will be understated $40,000. 78. Two separate errors affected Computer Sales in 20X5. The beginning inventory was understated by $28,000 and the ending inventory was understated by $43,000. Net income in 20X5 will be: a) understated by $43,000 b) understated by $71,000 c) understated by $15,000 d) overstated by $15,000 79. Two separate errors affected Computer Sales in 20X5. The beginning inventory was understated by $28,000 and the ending inventory was understated by $43,000. Net income in 20X6 will be: a) overstated by $15,000 b) overstated by $43,000 c) understated by $43,000 d) understated by $71,000 80. Two separate errors affected Computer Sales in 20X7. The beginning inventory was overstated by $12,000 and the ending inventory was overstated by $18,000. Net income in 20X7 will be: a) overstated by $30,000 b) overstated by $12,000 c) understated by $6,000 d) overstated by $6,000 81. If ending inventory for the current accounting period is overstated by $3,500: a) net income for the current period will be overstated by $3,500 b) ending inventory for the next period will be overstated by $3,500 c) cost of goods sold for the current period will be overstated by $3,500 d) owners equity at the end of the next accounting period will be overstated by $3,500 82. If ending inventory for the current period is understated, then owners equity will be: a) understated at the end of the current period, but it will be correct at the end of the next period b) understated at the end of the current period and overstated at the end of the next period c) overstated at the end of the current period, but it will be correct at the end of the next period

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d) overstated at the end of the current period and understated at the end of the next period 83. If ending inventory for the current accounting period is understated by $2,700: a) beginning inventory for the next period will be overstated by $2,700 b) net income for the current period will be overstated by$2,700 c) owners equity at the end of the next accounting period will be understated by $2,700 d) cost of goods sold for the current period will be overstated by $2,700 84. The following data are for the Daisy's Florist Shop for the first seven months of its fiscal year: Beginning inventory $53,500 Purchases Net sales revenue 93,700 Normal gross profit percent 30% 75,500

What is the estimated inventory on hand as determined by the gross profit method? a) $63,410 b) $65,590 c) $100,890 d) $28,110 85. The following data are for the Golden Oak Antique Shop for the first month of the current fiscal year: Beginning inventory $73,250 Purchases Net sales revenue 85,500 Normal gross profit percent 45% 57,650

What is the companys estimated cost of goods sold for the month? a) $38,475 b) $83,875 c) $92,425 d) $47,025 86. Assume a beginning inventory of $28,000, ending inventory of $47,000, and purchases of $110,000. If the gross profit percent is 60%, how much is net sales revenue? a) $168,333 b) $101,000 c) $252,500 d) none of the above 87. The a) b) c) d) method of computing ending inventory destroyed in a fire is called the: LIFO method gross profit method cost of goods sold method dollar-value method

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88. The adjusting entry at year end under a periodic inventory system includes a: a) debit to purchases and a credit to cost of goods sold for the beginning balance of purchases b) debit to cost of goods sold and a credit to inventory for the ending balance of inventory c) debit to cost of goods sold and a credit to inventory for the beginning balance of inventory d) no adjusting entry is required under a periodic inventory system 89. The a) b) c) d) journal entry to transfer the cost of purchases to cost of goods sold includes a: debit to cost of goods sold debit to inventory debit to purchases credit to cost of goods sold

90. The adjusting entry at year end under a periodic inventory system includes a: a) debit to inventory and a credit to cost of goods sold for the ending balance of inventory b) debit to cost of goods sold and a credit to inventory for the ending balance of inventory c) debit to purchases and a credit to inventory for the ending balance of purchases d) no adjusting entry is required under a periodic inventory system MATCHING a) b) c) d) e) f) g) h) i) j) FIFO Perpetual inventory system Conservatism LIFO Consistency principle Materiality concept Lower-of-cost-or-market rule Periodic inventory system Gross profit method Full disclosure principle

91. ______________ Requires that an asset be reported in the financial statements at whichever is lower, its historical cost or its current replacement cost 92. ______________ Inventory system sometimes referred to as the physical system because it relies on the actual physical count of inventory 93. ______________ A company must perform strictly proper accounting only for items that are significant to the businesss financial statements 94. ______________ A principle requiring the financial statements to report enough information for outsiders to make knowledgeable decisions about the business 95. ______________ A concept by which the least favorable figures are presented in the financial statements 96. ______________ A method used to estimate ending inventory 97. ______________ A principle requiring the use of the same accounting methods and procedures from period to period

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98. ______________ Inventory costing method in which ending inventory is based on the oldest costs, those of beginning inventory and the earliest purchases of the period 99. ______________ Inventory costing method in which ending inventory is based on the costs of the most recent purchases 100. ______________ Inventory system maintaining a continual count of inventory PROBLEMS AND CRITICAL THINKING EXERCISES 101. Compute the missing income statement amounts for each of the following independent companies: Compan y A B C D Net Sales Beginnin g Inventory $14,600 $29,500 $23,600 $11,200 Purchase s $65,000 (d) $53,700 (h) Ending Inventory (a) $23,600 (f) $ 9,400 Cost of Goods Sold $62,000 $96,200 (e) (g) Gross profit (b) $52,500 $23,900 $48,200

$ 93,000 (c) $ 89,300 $102,500

102. The following data are available for the month of April for State Company: April 1 inventory April 10 purchase April 20 purchase April 25 purchase State sold 630 units on April 22. 120 200 410 310 units units units units at at at at $8.15 $8.20 $8.40 $8.50 each each each each

Compute the value of ending inventory assuming State uses the perpetual LIFO inventory costing method. 103. The following data are available for the month of April for State Company: April 1 inventory April 10 purchase April 20 purchase April 25 purchase State sold 630 units on April 23. 120 200 410 310 units units units units at at at at $8.15 $8.20 $8.40 $8.50 each each each each

Compute the value of ending inventory assuming State uses the perpetual FIFO inventory costing method. 104. The following data pertain to Starr Company for the year ended December 31, 20X6: Beginning inventory balance $245,500 Purchases of inventory on credit during year670,000 Sales (60% on credit) during year 750,000

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Cost of goods sold during year 55% of sales

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Prepare all necessary journal entries under the perpetual inventory system to record purchases and sales for the year. 105. The following data are available for the month of March: March March March March 1 balance 10 purchase 17 purchase 30 purchase 20 40 30 25 units units units units at at at at $15 each $16 each $17.50 each $18 each

On March 31, 35 units are on hand. Calculate cost of goods sold under the following methods: a) FIFO b) LIFO c) average cost (round per unit cost to the nearest cent, round final answer to the nearest dollar) 106. State which inventory method would best meet the specific goal of management stated below. Show your answer by inserting the proper letter beside each statement. a) b) c) d) Specific unit cost LIFO FIFO Average cost _____1) Management desires to properly match cost of goods sold with net sales revenue. _____2) Management desires to minimize the companys ending inventory balance during a period of falling prices. _____3) The company sells rare, antique items. _____4) Management desires to show the current value inventory on the balance sheet. _____5) Management desires to minimize the companys tax liability during a period of rising prices.

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107. Identify the inventory method; FIFO, LIFO, average cost, or specific unit cost, most likely used for the following situations. a)____________ b)____________ c)____________ d)____________ e)____________ goods sold f)____________ matches the most current cost of goods sold against sales revenue results in ending inventory close to current cost of replacing inventory used to account for automobiles generally tends to maximize net income provides a middle-ground measure of ending inventory and cost of generally thought of as the best method to minimize income taxes

108. Jupiter Enterprises reports net sales revenue for 20X6 to be $595,000, January 1, 20X6, inventory at $102,000, net purchases at $370,000, and operating expenses at $155,000. Jupiter Enterprises currently values inventory using LIFO. Using the LIFO method, December 31, 20X6, inventory is valued at $89,000. Jupiter is considering changing to the FIFO inventory method. Under FIFO, December 31, 20X6, inventory would be valued at $96,700. Compute net income for 20X6 assuming Jupiter Enterprises uses: a) LIFO to value its ending inventory b) FIFO to value its ending inventory 109. The following data are available for the month of April for State Company: April 1 inventory April 10 purchase April 20 purchase April 25 purchase State sold 630 units during April. 120 200 410 310 units units units units at at at at $8.25 $8.20 $8.40 $8.50 each each each each

Compute the value of ending inventory under the periodic average cost method. (round per unit cost to the nearest cent, round final answer to the nearest dollar) 110. The following data are available for Plastic Products Company for 20X6: Sales revenue January 1 inventory at cost Purchases December 31 inventory at cost $400,500 110,600 275,000 95,000

The current replacement cost of the inventory on December 31 is $92,500. Compute gross profit for Plastic Products Company assuming the use of the lower-of-cost-ormarket rule to value ending inventory.

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111. Determine the effect on cost of goods sold and net income for the current year of the following inventory errors. Indicate your answer with either a + (overstated) or a (understated). Item Error Effect on Cost of Goods Sold Effect on Net Income

1) 2) 3) 4)

Beginning inventory is understated. Ending inventory is understated. Beginning inventory is overstated. Ending inventory is overstated.

112. The following data are available for three products of the McGuire Company: A Beginning inventory Purchases Goods available for sale Ending inventory Cost of goods sold You discover the following errors: a) b) c) Ending inventory for product A was overstated by $6,000. Ending inventory for product B was understated by $5,000. Beginning inventory for product C was overstated by $3,000. B $ 15,000 45,000 60,000 18,000 42,000 C $27,000 65,000 92,000 13,000 79,000 $15,000 62,000 77,000 9,000 68,000

Considering these errors, recalculate cost of goods sold for each product. 113. The bookkeeper for the Duncan Corporation made an error in recording the year-end inventory balance on December 31, 20X5. As a result, ending inventory was understated by $37,000. a) What effect will this error have on cost of goods sold, gross profit, net income, and owners equity in 20X5? b) As of December 31, 20X6, what will be the cumulative effect of this error on owners equity? 114. Late on the night of November 30, 20X5, an arsonist destroyed the Salem Company warehouse which was full of inventory. Luckily the accounting records were stored in another facility and not destroyed in the fire. Salem Company is in the process of filing a claim with its insurance company for the inventory loss due to the fire. Beginning inventory $375,500

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Purchases through November 30, 20X5470,250 Net sales revenue through November 30, 20X5 765,200 The gross profit percent has historically been 40% of net sales revenue.

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Estimate the value of the inventory destroyed in the fire using the gross profit method. 115. The following data pertain to Computer Bytes for the year ended December 31, 20X5: January 1, 20X5, inventory balance $180,500 Purchases of inventory on credit during year388,000 Sales (40% on credit) during year 650,000 December 31, 20X5, inventory balance250,700 a) Prepare all necessary journal entries under the periodic inventory system to record purchases and sales for the year and any necessary adjusting entries on December 31, 20X3. b) Calculate cost of goods sold under the periodic inventory system.