Chapter 6 Test Questions

# Chapter 6 Test Questions - P6.56 P6.57 P6.65 P6.56 Date 6...

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P6.56 P6.57 P6.65 P6.56 Date 6-May 18 26 Requirements 1 Inventory Costing Method The inventory costing method is used to record the cost of goods s The following are the three cost flows assumptions that are used t Specific unit cost Average cost First-in-first-out (FIFO) Last-in-first-out (LIFO) Camp Surplus began May 2014 with 67 tents that cost \$25 each. During the month, Camp Surplus made the following purchases at cost: Camp Surplus sold 323 tents and at May 31 the ending inventory consists of 49 tents. The sales price of each tent was \$51. Determine the price of goods sold and ending inventory amounts for May under the average cost, FIFO cost, and LIFO cost. Round average cost per unit to two decimal places, and round all other amounts to the nearest dollar. Average Cost Metho d The cost flow assumption method that distributes the total cost of goods available for sale among all the available units. Compute the value of cost of goods sold and cost of ending inventory for May 2014 using average cost method.

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Date Purchased Sold Quanity Unit Cost (\$) 1-May 6-May 101 \$27 18-May 163 \$29 26-May 41 \$30 31-May Number of units as of May 1 = 67 units Number of units purchased on May 6 = 101 Number of units purchased on May 18 = 163 Number of units purchased on May 26 = 41 Total cost as of May 1 = \$1,675 Total cost of units purchased on May 6 = \$2,727 Total cost of units purchased on May 18 = \$4,727 Total cost of units purchased on May 26 = \$1,230 ((Total Units on May 1) + (Total Units pu 67 units + 101 units + 163 units + 41 uni 372 units Average Cost on May 26 = \$ 27.85 FIFO: Inventory bought first iis used or transferred out first Therefore, the cost of ending inventory is \$1,365 and the cost of goods sold is \$8,996. Compute the average cost of inventory after the May 26 purchase Average Cost on May 26 = (Total cost of (May2) + (Total cost of pur Average Cost on May 26 = \$1,675 + \$2,727 + \$4,727 + \$1,230 Average Cost on May 26 = \$10,359 Compute the value of cost of goods sold and cost of ending inventory for May 2014 using FIFO cost.
Date Purchased Quanity 1-May 6-May 101 18-May 163 26-May 41 31-May The cost of ending inventory is \$1,462 and cost of goods sold is \$8 LIFO: With the LIFO, the inventory purchased later is used first or t Date Purchased Quanity 1-May 6-May 101 18-May 163 26-May 41 31-May The cost of ending inventory is \$1,225 and cost of goods sold is \$9 With the FIFO method, the inventory purchased earlier, will be used or sold first. The inventory inventory left out at the end would be tne inventory purchased in the last. Therefore, take the price per unit in the last.

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LIFO cost method produces the highest cost of goods sold for the f High price products(which are bought recently) are used first and l The high price of inventory or latest price results in the high cost o 3 Prepare the Income Statement for Surplus C for the month of May Surplus C Income Statemetn For the Month Ended May 31, 2014 Sales Revenue \$16,473 Cost of goods sold 8,996 Gross profit 7,477
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• Spring '14
• BarbaraPeery
• Revenue, MGT 5000, FIFO and LIFO accounting, total units

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