Chapter 6 Inventories and Cost of Sales

Chapter 6 Inventories and cost of sales

QUCIK STUDY

QS 6-3

Mercedes Brown starts a merchandising business on December 1 and enters into three inventory purchases:

Brown sells 18 units for each $35 each on December 15. Seven of the sold units are from the December 7 purchase and eleven are from the December 14 purchase. Brown uses a perpetual inventory system. Determine the costs assigned to the December 31 ending inventory based on (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification. (Round per unit costs to three decimals, but inventory balances to the dollar.)

QS 6-5

1. Jabar Company has shipped $600 of goods to Chi Co. has arranged to sell the goods for Jabar. Identify the consignor and the consignee. Which company should include any unsold goods as part of its inventory?

2. At year-end, Liu Co, had shipped $750 of merchandise FOB destination to Kwon Co. which company should include the $750 of merchandise in transit as part of its year-end inventory?

QS 6-6

A car dealer acquired a used car for $17,500, terms FOB shipping point. Additional costs in obtaining and offering the car for sale include $300 for transportation-in, $1,000 for import duties, $250 for insurance during shipment, $400 for advertising, and $3,000 for sales staff salaries. For computing inventory, what cost is assigned to the uses car?

QS 6-7

Apoli Trading Co, has the following products in its ending inventory. Compute lower of cost or market for inventory (a) as a whole and (b) applied separately to each product.

EXERCISES

Exercises 6-2

Harper Co, reported the following current-year purchases and sales date for its only product.

Harper uses a perpetual inventory system. Determine the costs assigned to ending inventory and to cost of goods sold using (a) FIFO and (b) LIFO. Compute the gross margin for each method.

Exercises 6-5

Maya Company's ending inventory includes the following items. Compute the lower of cost or market for ending inventory (a) as a whole and (b) applied separately to each product.