LIFO FIFO - important question for reference PDF

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FIFO and LIFO Costs Under Perpetual Inventory System The following units of a particular item were available for sale during the year: Beginning inventory 33 units @ $42 Sale 17 units @ $61 First purchase 38 units @ $44 Sale 5 units @ $61 Second purchase 22 units @ $46 Sale 12 units @ $63 The firm uses the perpetual inventory system, and there are 59 units of the item on hand at the end of the year. a. What is the total cost of the ending inventory according to FIFO? $ 2640 b. What is the total cost of the ending inventory according to LIFO? $2584

Periodic Inventory by Three Methods The units of an item available for sale during the year were as follows: Jan. 1 Inventory 12 units @ $31 Feb. 17 Purchase 4 units @ $33 Jul. 21 Purchase 9 units @ $35 Nov. 23 Purchase 14 units @ $37 There are 4 units of the item in the physical inventory at December 31. The periodic inventory system is used. Round average unit cost to one decimal and final answers to the nearest whole dollar, if required. a. Determine the inventory cost by the first-in, first-out method. $ 148 b. Determine the inventory cost by the last-in, first-out method. $ 124 c. Determine the inventory cost by the weighted average cost method. $137

Periodic Inventory Using FIFO, LIFO, and Weighted Average Cost Methods The units of an item available for sale during the year were as follows: Jan. 1 Inventory 17 units at $39 $663 July 7 Purchase 13 units at $40 520 Nov. 23 Purchase 19 units at $41 779 49 units $1,962 There are 15 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost using (a) the first-in, first-out (FIFO) method; (b) the last-in, first-out (LIFO) method; and (c) the weighted average cost method (round per unit cost to two decimal places and your final answer to the nearest whole dollar).

a. First-in, first-out (FIFO) $ 615 b. Last-in, first-out (LIFO) $ 585 c. Weighted average cost $601

Cost Flow Methods Three identical units of Item K113 are purchased during July, as shown below. Item K113

Units

Cost

July 9

Purchase

1

$129

July 17

Purchase

1

131

July 26

Purchase

1

133

3

$393

Total Average cost per unit

$131

($393 ÷ 3 units)

Assume that one unit is sold on July 31 for $169. Determine the gross profit for July and ending inventory on July 31 using the (a) first-in, first-out (FIFO); (b) last-in, first-out (LIFO); and (c) weighted average cost methods. Gross Profit a. First-in, first-out (FIFO)

$

40

Ending Inventory $

264

b. Last-in, first-out (LIFO)

$

c. Weighted average cost

$

36

$

38

$

260

262

Effect of Inventory Errors During the taking of its physical inventory on December 31, 2014, Zula Company incorrectly counted its inventory as $213,090 instead of the correct amount of $242,925. Indicate the effect of the misstatement on Zula's December 31, 2014, balance sheet and income statement for the year ended December 31, 2014. Also record the amount of each overstatement or understatement. Enter all amounts as positive numbers. Income Statement

Overstated

Cost of merchandise sold Income Statemen

Overstated

Balance Sheet

Understated

Balance Sheet

Understated

Current assets

Income Statement

Understated

Balance Sheet

Understated

Balance Sheet

Understated

Merchandise inventory

Income Statement

Understated

Balance Sheet

Understated

Balance Sheet

Understated

Balance Sheet

Understated

Balance Sheet

Understated

Owner's equity

Total assets

Test

29835

$

$

29835

29835

Understated

Net income Income Statemen

$

29835

Understated

Gross profit Income Statemen

$

$

$

$

29835

29835

29835

1. If ending inventory for the year is understated, net income for the year is overstated. True False

2. The following units of an inventory item were available for sale during the year: Beginning inventory

10 units at $55

First purchase

25 units at $60

Second purchase

30 units at $65

Third purchase

15 units at $70

The firm uses the periodic inventory system. During the year, 60 units of the item were sold. The value of ending inventory using LIFO is a.$1,350 b.$1,150 c.$1,250 d.$1,375

3. During periods of increasing costs, the use of the FIFO method of costing inventory will result in a greater amount of net income than would result from the use of the LIFO cost method. True False

4. The lower-of-cost-or-market method of determining the value of ending inventory can be applied on an item by item, by major classification of inventory, or by the total inventory. True False

5. The following units of an inventory item were available for sale during the year: Beginning inventory

10 units at $55

First purchase

25 units at $60

Second purchase

30 units at $65

Third purchase

15 units at $70

The firm uses the periodic inventory system. During the year, 60 units of the item were sold. The value of ending inventory rounded to nearest dollar using average cost is: a.$1,263 b.$1,353 c.$1,150 d.$1,375

6. The inventory data for an item for November are: Nov. 1

Inventory

20 units at $19

Sold

10 units

10

Purchased

30 units at $20

17

Sold

20 units

30

Purchased

10 units at $21

4

Using a perpetual system, what is the cost of the merchandise sold for November if the company uses FIFO? a.$610 b.$590 c.$580 d.$600

7. The inventory method that assigns the most recent costs to cost of merchandise sold is specific identification weighted average FIFO LIFO

8. Addison, Inc. uses a perpetual inventory system. The following is information about one inventory item for the month of September: Sep. 1

Inventory

20 units at $20

Sold

10 units

10

Purchased

30 units at $25

17

Sold

20 units

30

Purchased

10 units at $30

4

If Addison uses LIFO, the cost of the ending merchandise inventory on September 30 is a.$650 b.$750 c.$800 d.$700

9. Ending inventory is made up of the oldest purchases when a company uses first-in, first-out average cost retail method

last-in, first-out

10. Market" as used in the phrase "lower of cost or market" for valuing inventory, refers to the price at which the inventory is being offered for sale by its owner. True False

11. Under a periodic inventory system accounting records continuously disclose the amount of inventory merchandise inventory is debited when goods are returned to vendors a separate account for each type of merchandise is maintained in a subsidiary ledger a physical inventory is taken at the end of the period

12. The specific identification inventory method should be used when the inventory consists of identical, low-cost units that are purchased and sold frequently. True False

13. The following lots of a particular commodity were available for sale during the year: Beginning inventory

10 units at $30

First purchase

25 units at $32

Second purchase

30 units at $34

Third purchase

10 units at $35

The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of inventory at the end of the year according to the LIFO method? a.$620

b.$659 c.$655 d.$690

14. FIFO is the inventory costing method that follows the physical flow of the goods. True False

15. The following units of an inventory item were available for sale during the year: Beginning inventory

10 units at $55

First purchase

25 units at $60

Second purchase

30 units at $65

Third purchase

15 units at $70

The firm uses the periodic inventory system. During the year, 60 units of the item were sold. The value of ending inventory using FIFO is a.$1,350 b.$1,250 c.$1,375 d.$1,150

16. The weighted average inventory cost flow method is the least used of the inventory costing methods. True False

17. Under the LIFO inventory costing method, the most recent costs are assigned to ending inventory. True False

18. Addison, Inc. uses a perpetual inventory system. The following is information about one inventory item for the month of September: Sep. 1

Inventory

20 units at $20

Sold

10 units

10

Purchased

30 units at $25

17

Sold

20 units

30

Purchased

10 units at $30

4

If Addison uses FIFO, the cost of the ending merchandise inventory on September 30 is a.$650 b.$750 c.$800 d.$700

19. The inventory data for an item for November are: Nov. 1

Inventory

20 units at $19

Sold

10 units

10

Purchased

30 units at $20

17

Sold

20 units

30

Purchased

10 units at $21

4

Using a perpetual system, what is the cost of the merchandise sold for November if the company uses LIFO?

a.$600 b.$590 c.$580 d.$610

20. The average cost method will always yield results between FIFO and LIFO. True False

21. The following lots of a particular commodity were available for sale during the year: Beginning inventory

10 units at $60

First purchase

25 units at $65

Second purchase

30 units at $68

Third purchase

15 units at $75

The firm uses the periodic system and there are 25 units of the commodity on hand at the end of the year. What is the amount of the inventory at the end of the year using the LIFO method? a.$1,805 b.$3,815 c.$1,685 d.$1,575

22. When merchandise sold is assumed to be in the order in which the purchases were made, the company is using

average cost last-in, first-out first-in, last-out first-in, first-out

23. The following lots of a particular commodity were available for sale during the year: Beginning inventory

10 units at $60

First purchase

25 units at $65

Second purchase

30 units at $68

Third purchase

15 units at $75

The firm uses the periodic system and there are 25 units of the commodity on hand at the end of the year. What is the amount of the inventory at the end of the year using the FIFO method? a.$1,685 b.$1,805 c.$1,575 d.$3,585

24. FIFO reports higher gross profit and net income than the LIFO method when prices remain stable prices are decreasing prices are reduced by 50% prices are increasing

25. When using the FIFO inventory costing method, the most recent costs are assigned to the cost of merchandise sold. True False...