Exercise 8-6 Goods in transit LO8-2 The Kwok Company's...

This preview shows page 1 - 4 out of 13 pages.

McGraw week 1 1. Exercise 8-6 Goods in transit [LO8-2] The Kwok Company's inventory balance on December 31, 2013, was $230,000 (based on a 12/31/13 physical count) before considering the following transactions: 1. Goods shipped to Kwok f.o.b. destination on December 20, 2013, were received on January 4, 2014. The invoice cost was $43,000. 2. Goods shipped to Kwok f.o.b. shipping point on December 28, 2013, were received on January 5, 2014. The invoice cost was $30,000. 3. Goods shipped from Kwok to a customer f.o.b. destination on December 27, 2013, were received by the customer on January 3, 2014. The sales price was $53,000 and the merchandise cost $35,000. 4. Goods shipped from Kwok to a customer f.o.b. destination on December 26, 2013, were received by the customer on December 30, 2013. The sales price was $33,000 and the merchandise cost $26,000. 5. Goods shipped from Kwok to a customer f.o.b. shipping point on December 28, 2013, were received by the customer on January 4, 2014. The sales price was $38,000 and the merchandise cost $25,000. Required: Determine the correct inventory amount to be reported in Kwok's 2013 balance sheet.
2. Exercise 8-13 Inventory cost flow methods; periodic system [LO8-1, LO8-4] Altira Corporation uses a periodic inventory system. The following information related to its merchandise inventory during the month of August 2013 is available: Aug.1 Inventory on hand—9,500 units; cost $8.20 each. 8 Purchased 28,000 units for $7.3 each. 14 Sold 20,000 units for $13.8 each. 18 Purchased 15,000 units for $ 6.8 each.
25 Sold 19,000 units for $12.8 each. 31 Inventory on hand—13,500 units. Required: Determine the inventory balance Altira would report in its August 31, 2013, balance sheet and the cost of goods sold it would report in its August 2013 income statement using each of the following cost flow methods: (Do not round intermediate calculations.) Cost Flow Method Inventory Balance Cost of Goods Sold 1. First-in, first-out (FIFO) $ $ 2. Last-in, first-out (LIFO) $ $ 3. Average cost $ $ Explanation: Cost of goods available for sale: Beginning inventory (9,500 ×$8.20) $ 77,900 Purchases: 28,000 × $7.3 $ $204,400 15,000 × $6.8 102,000 306,400 Cost of goods available (18,000 units) $ 384,300 First-in, first-out (FIFO) Cost of goods available for sale (52,500 units) $ 384,300 Less: Ending inventory (determined below) (91,800) Cost of goods sold $ 292,500 Cost of ending inventory: Date of Purchas e Units Unit Cost Total Cost Aug ust 18 13,50 0 $ 6.8 $ 91,80 0 Last-in, first-out (LIFO)
Cost of goods available for sale (52,500 units) $ 384,300 Less: Ending inventory (determined below) (107,100) Cost of goods sold $ 277,200 Cost of ending inventory: Date of Purchas e Units Unit Cost Total Cost Be g. Inv. 9,50 0 $ 8.20 $ 77,9 00 Au gust 8 4,00 0 7.3 29,2 00 Total $ 107, 100 Average cost Cost of goods available for sale (52,500 units) $ 384,300 Less: Ending inventory (determined below) (98,820) Cost of goods sold $ 285,480* Cost of ending inventory: Weighted-average unit cost = $384,300 = $7.32 52,500 units 13,500 units × $7.32 = $98,820 *Alternatively, could be determined by multiplying the units sold by the average cost: 39,000 units × $7.32 = $285,480 3.

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture