Exam 8: Inventories: Measurement

The following information is taken from the accounting records of Rapid Runner Inc. for the year 2009. Missing information has been left blank. Required: Compute the missing amounts. -

Costs and prices regularly fall every year in the microcomputer industry. Briefly indicate your recommendation and rationale for an inventory method for a firm about to enter this industry.

Patty's Pet Store purchased merchandise on October 10, 2009, at a price of $35,000, subject to credit terms of 2/10, n30. Patty's uses the gross method for recording purchases and uses perpetual inventory system. Required: 1. Prepare the journal entry to record the purchase. 2. Prepare the journal entry to record the payment of one-half the invoice amount on October 18, 2009. 3. Prepare the journal entry to record the payment of the balance of the amount due on November 8, 2009.

Required: Compute the ending inventory and cost of goods sold assuming Denver uses LIFO and a periodic inventory system.

The following information is taken from the accounting records of Madeline Inc. for the year 2009. Missing information has been left blank. Inventory is the only supply that Madeline purchases on credit. Required: Compute the missing amounts. -

What is Nu's net income if it elects FIFO?

The primary reason for the popularity of LIFO is that it:

During periods when costs are rising and inventory quantities are stable, cost of goods sold will be:

Compared to dollar-value LIFO, unit LIFO is:

Appleton Inc. adopted dollar-value LIFO on January 1, 2009, when the inventory value was $1,200,000. The December 31, 2009, ending inventory at year-end costs was $1,430,000 and the cost index for the year is 1.1. Required: Compute the dollar-value LIFO inventory valuation for the December 31, 2009, inventory.

Bascomb Company purchased $420,000 in merchandise on account during the month of April, and merchandise costing $350,000 was sold on account for $425,000. Required: 1. Prepare journal entries to record the purchases and sales assuming Bascomb uses a perpetual inventory system. 2. Prepare journal entries to record the purchases and sales assuming Bascomb uses a periodic inventory system.

During 2009, WW Inc. reduced its LIFO eligible inventory quantities due to a problem with its major supplier. The effect of this liquidation was to increase its cost of goods sold by approximately $50 million. WW has a 40% income tax rate. If WW had not experienced these supplier problems and the resulting liquidation,

FIFO periodic and FIFO perpetual always produce the same amounts for cost of goods sold.

Alison's dress shop buys dresses from McGuire Manufacturing. Alison purchased dresses from McGuire on July 17, and received an invoice with a list price amount of $6,000 and payment terms of 2/10, n/30. Alison uses the net method to record purchases. Alison should record the purchase at:

Carmen Inc., producers of high tech boating equipment, disclosed the following information in its 2009 annual report to shareholders: Inventories are valued at the lower of cost or net realizable value with cost determined by the last-in, first-out (LIFO) method for inventories. Inventories at May 31 were as follows: How does the supplemental LIFO information indicating what the value of ending inventory would have been if measured using FIFO improve the quality of financial reporting by Carmen?

Suppose that Badger's 2010 ending inventory, valued at year-end costs, was $143,000 and that the relative cost index for this inventory in 2010 was 1.10. In determining the inventory balance should Badger report in its 12/31/10 balance sheet:

Unit LIFO is more costly to implement than dollar-value LIFO.

ATC's inventory turnover ratio for 2009 is:

The ending inventory assuming LIFO and a periodic inventory system is:

Dollar-value LIFO: