Corporate Financial Accounting
14th Edition
ISBN: 9781305653535
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Textbook Question
Chapter 6, Problem 6.3TIF
Communication
Golden Eagle Company began operations on April 1 by selling a single product. Data on purchases and sales for the year are as follows:
Purchases:
| Date | Units Purchased | Unit Cost | Total Cost |
| April 6 | 31,000 | $36.60 | $1,134,600 |
| May 18 | 33,000 | 39.00 | 1,287,000 |
| June 6 | 40,000 | 39.60 | 1,584,000 |
| July 10 | 40,000 | 42.00 | 1,680,000 |
| August 10 | 27,200 | 42.75 | 1,162,800 |
| October 25 | 12,800 | 43.50 | 556,800 |
| November 4 | 8,000 | 44.85 | 358,800 |
| December 10 | 8,000 | 48.00 | 384,000 |
| 200,000 | $8,148,000 |
Sales:
| April | 16,000 units |
| May | 16,000 |
| June | 20,000 |
| July | 24,000 |
| August | 28,000 |
| September | 28,000 |
| October | 18,000 |
| November | 10,000 |
| December | 8,000 |
| Total Units | 168,000 |
| Total sales | $10,000,000 |
The president of the company, Connie Kilmer, has asked for your advice on which inventory cost flow method should be used for the 32,000-unit physical inventory that was taken on December 31. The company plans to expand its product line in the future and uses the periodic inventory system.
Write a brief memo to Ms. Kilmer comparing and contrasting the LIFO and FIFO inventory cost flow methods and their potential impacts on the company’s financial statements.
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Golden Eagle Company began operations on April 1 by selling a single product. Data on
purchases and sales for the year are as follows:
Purchases:
Units Purchased
Total Cost
Date
Unit Cost
April 6
May 18
$1,134,600
$36.60
31,000
1,287,000
33,000
39.00
June 6
40,000
39.60
1,584,000
July 10
August 10
40,000
42.00
1,680,000
27,200
42.75
1,162,800
October 25
12,800
43.50
556,800
November 4
8,000
44.85
358,800
December 10
384,000
8,000
48.00
200,000
$8,148,000
Sales:
April
16,000 units
May
16,000
June
20,000
July
24,000
August
28,000
September
28,000
October
18,000
November
10,000
December
8,000
Total units
168,000
Total sales
$10,000,000
The president of the company, Connie Kilmer, has asked for your advice on which inventory
cost flow method should be used for the 32,000-unit physical inventory that was taken on
December 31. The company plans to expand its product line in the future and uses the
periodic inventory system.
Write a brief memo to Ms. Kilmer comparing and contrasting the LIFO…
Date of Purchase
Units
Unit Cost
Total Cost
January 7
8,000
February 16
24,000
$ 5.00
6.00
March 22
28,000
7.00
$ 40,000
144,000
196,000
Totals
60,000
$ 380,000
Sales for the quarter, all at $9 per unit, totaled 33,000 units leaving 27,000 units on hand at the end of the quarter.
Required:
1. Calculate Topanga's cost of goods sold for the first quarter using:
a. FIFO
b. LIFO
c. Average cost
2. Calculate Topanga's gross profit ratio for the first quarter using FIFO, LIFO, and Average cost.
3. Comment on the relative effect of each of the three inventory methods on the gross profit ratio.
Complete this question by entering your answers in the tabs below.
Req 1A
Req 1B
Req 1C
Req 2
Req 3
Calculate Topanga's cost of goods sold for the first quarter using FIFO.
Cost of Goods Available for Sale Cost of Goods Sold - Periodic FIFO
FIFO:
Cost of Goods
Number Cost per Available for
of units unit
Sale
Number
of units
sold
Cost per
unit
Cost of
Goods Sold
Ending Inventory - Periodic FIFO
Number of…
Shown below are information provided by the bookkeeper of Luna Corporation:
A. Sales for the month of December totaled 286,000 units.
B. The following purchases were made in December:
Date Quantity Unit Cost
12/4 50,000 P13.00
12/8 62,500 12.50
12/11 75,000 12.00
12/24 70,000 12.40
C. There were 108,500 units on hand on December 1 with a total cost of P1,450,000.
D. The company uses a periodic FIFO costing system. Its gross…
Chapter 6 Solutions
Corporate Financial Accounting
Ch. 6 - Prob. 1DQCh. 6 - Why is it important to periodically take a...Ch. 6 - Do the terms FIFO, LIFO, and weighted average...Ch. 6 - If inventory is being valued at cost and the price...Ch. 6 - Which of the three methods of inventory...Ch. 6 - If inventory is being valued at cost and the price...Ch. 6 - Using the following data, how should the inventory...Ch. 6 - The inventory at the end of the year was...Ch. 6 - Hutch Co. sold merchandise to Bibbins Company on...Ch. 6 - A manufacturer shipped merchandise to a retailer...
Ch. 6 - Cost flow methods The following three identical...Ch. 6 - Perpetual inventory using FIFO Beginning...Ch. 6 - Perpetual inventory using LIFO Beginning...Ch. 6 - Periodic inventory using FIFO, UFO, and weighted...Ch. 6 - Lower-of-cost-or-market method On the basis of the...Ch. 6 - Effect of inventory errors During the taking of...Ch. 6 - Control of inventories Triple Creek Hardware Store...Ch. 6 - Control of inventories Hardcase Luggage Shop is a...Ch. 6 - Perpetual inventory using FIFO Beginning...Ch. 6 - Perpetual inventory using LIFO Assume that the...Ch. 6 - Perpetual inventory using LIFO Beginning...Ch. 6 - Perpetual inventory using FIFO Assume that the...Ch. 6 - FIFO and UFO costs under perpetual inventory...Ch. 6 - Weighted average cost flow method under perpetual...Ch. 6 - Weighted average cost flow method under perpetual...Ch. 6 - Perpetual inventory using FIFO Assume that the...Ch. 6 - Perpetual inventory using LIFO Assume that the...Ch. 6 - Periodic inventory by three methods The units of...Ch. 6 - Periodic inventory by three methods; cost of goods...Ch. 6 - Comparing inventory methods Assume that a firm...Ch. 6 - Lower-of-cost-or-market inventory On the basis of...Ch. 6 - Inventory on the balance sheet Based on the data...Ch. 6 - Effect of errors n physical inventory Madison...Ch. 6 - Effect of errors in physical inventory Fonda...Ch. 6 - Prob. 6.19EXCh. 6 - Retail method A business using the retail method...Ch. 6 - Retail method A business using the retail method...Ch. 6 - Prob. 6.22EXCh. 6 - Retail method On the basis of the following data,...Ch. 6 - Prob. 6.24EXCh. 6 - Gross profit method Based on the following data,...Ch. 6 - Gross profit method Based on the following data,...Ch. 6 - FIFO perpetual inventory The beginning inventory...Ch. 6 - LIFO perpetual inventory The beginning inventory...Ch. 6 - Weighted average cost method with perpetual...Ch. 6 - Periodic inventory by three methods The beginning...Ch. 6 - Periodic inventory by three methods Dymac...Ch. 6 - Lower-of-cost-or-market inventory Data on the...Ch. 6 - Retail method; gross profit method Selected data...Ch. 6 - FIFO perpetual inventory The beginning inventory...Ch. 6 - LIFO perpetual inventory The beginning inventory...Ch. 6 - Weighted average cost method with perpetual...Ch. 6 - Periodic inventory by three methods The beginning...Ch. 6 - Periodic inventory by three methods Pappas...Ch. 6 - Lower-of-cost-or-market inventory Data on the...Ch. 6 - Retail method; gross profit method Selected data...Ch. 6 - Continuing Company AnalysisAmazon: Inventory...Ch. 6 - Costco, Walmart, Nordstrom: Inventory turnover and...Ch. 6 - Monster Beverage and Brown-Forman: Inventory...Ch. 6 - Prob. 6.4ADMCh. 6 - Ethics in Action Sizemo Elektroniks sells...Ch. 6 - Communication Golden Eagle Company began...
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