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Solution-Final-F06

Solution-Final-F06 - Solution of the final exam COMM 217...

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Solution of the final exam COMM 217 – Fall 2006 Question 1 (24 marks; 1.5 mark each) 1. A 2. A 3. B 4. C 5. B 6. C 7. A 8. D 9. A 10. C 11. B 12. B 13 C 14. D 15. D 16. B

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Question 2 (18 marks) Part A (12 marks) Req. 1 (3 marks) Units (boxes) sold = 500 + 700 = 1,200 Cost of goods sold (FIFO, periodic) consists of the following: All of the purchase of January 5 (i.e., 800 units) \$160,000 Plus: 400 units from the purchase of Jan. 15 (400 x \$132,000 / 600) 88,000 Cost of goods sold (FIFO, periodic) \$248,000 Req. 2 (4 marks) Units (cartons) sold = 1,200 (see Req. 1) Cost of goods sold (LIFO, periodic) consists of the following: All of the purchase of January 30, i.e., 500 units \$110,000 Plus: all of the purchase of January 15, i.e., 600 units 132,000 Plus: 100 units from the purchase of Jan. 5 (100 x \$160,000 / 800) 20,000 Cost of goods sold (LIFO, periodic) \$262,000 The cost of goods sold is therefore higher under LIFO than FIFO by \$14,000 (= \$262,000 - \$248,000). Income before tax is therefore lower by \$14,000, and net income is lower by \$9,800 (=\$14,000 x 70%) under LIFO compared to FIFO. Req. 3 (3 marks) The weighted average unit cost = \$160,000 + \$132,000 + \$110,000 = \$402,000 = \$211.58 800 + 600 + 500 1,900 Since the net realizable value per unit is \$205, the book value of inventory should be reduced by \$6.58 per unit in conformity with the lower-of-cost-and-market rule . Units in ending inventory = 1,900 – 500 – 700 = 700 700 x \$205 = \$143,500 Req. 4 (2 marks) When a perpetual inventory system is used, the weighted average cost is calculated after each purchase. Since the purchase price per box increased during the month, the ending inventory would be higher.
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Solution-Final-F06 - Solution of the final exam COMM 217...

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