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Mgmt_200_Fall_2007_Exam_2_Solution(2,21)

# Mgmt_200_Fall_2007_Exam_2_Solution(2,21) - Name PUID Purdue...

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Name: ________________________ PUID: ________________________ Purdue University Krannert School of Management MGMT 200 – Introductory Financial Accounting Fall 2007 Exam 2 – October 29, 2007 - Solution This exam consists of 4 questions on 10 pages (excluding this cover page) for a total of 100 points. Time allowed: 90 minutes. Answer all questions. To ensure full credit and to maximize partial credit, clearly show all supporting calculations. The exam is closed book. A calculator is permitted. GOOD LUCK . Question 1 (24 points) ________ Question 2 (25 points) ________ Question 3 (26 points) ________ Question 4 (25 points) ________ TOTAL (100 points) ________

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Question 1. Inventory (24 points) Criterion Imports was formed in late 2002 to sell a single product, the Cycle2000, which is imported from France. Due to price increases and fluctuating exchange rates the cost of this product almost doubled during 2005 and 2006. Sales for 2006 were \$884,000 or 6,800 units (sales for 2005 totaled \$570,000 or 6,000 units). Criterion uses a periodic inventory system and provides the following information about cost of goods purchased during the last two years: Opening Inventory (12/31/04) 1,400 units @ \$56.00 \$78,400 Purchase, April 16, 2005 3,200 units @ \$60.00 \$192,000 Purchase, July 28, 2005 3,400 units @ \$76.00 \$258,400 Purchase, March 23, 2006 2,800 units @ \$90.50 \$253,400 Purchase, September 3, 2006 3,200 units @ \$110.00 \$352,000 A physical inventory count at year-end, December 31, 2006 reveals 1,200 units still on hand (inventory on hand at December 31, 2005 was 2,000 units). Required: Compute Cost of Goods Sold and Ending Inventory for both 2005 and 2006 for Criterion Imports for each of the three inventory methods: Weighted average (WAVE), FIFO, and LIFO. WAVE FIFO LIFO Cost of goods sold, 2005 396,600 376,800 414,400 Inventory, December 31, 2005 132,200 152,000 114,400 Cost of goods sold, 2006 626,900 625,400 652,600 Inventory, December 31, 2006 110,640 132,000 67,200 (Show supporting calculations on the following page) Question 1 continued over . . . Mgmt 200 – Exam 2 Solution Outline – Fall 2007 – page 1
Question 1 continued Supporting calculations: WAVE (2005) = [78,400 + 192,000 + 258,400] / [1,400 + 3,200 + 3,400] = \$66.10 COGS = 6,000 x \$66.10 = \$396,600 EI = 2,000 x \$66.10 = \$132,200 WAVE (2006) = [132,200 + 253,400 + 352,000] / [2,000 + 2,800 + 3,200] = \$92.20 COGS = 6,800 x \$92.20 = \$626,960 EI = 1,200 x \$92.20 = \$110,640 FIFO, COGS, 2005 = 78,400 + 192,000 + [1,400 x \$76] = \$376,800 FIFO, EI, 2005 = [2,000 x \$76] = \$152,000 FIFO, COGS, 2006 = 152,000 + 253,400 + [2,000 x \$110] = \$625,400 FIFO, EI, 2006 = [1,200 x \$110] = \$132,000 LIFO, COGS, 2005 = 258,400 + [2,600 x \$60] = \$414,400 LIFO, EI, 2005 = 78,400 + [600 x \$60] = \$114,400 LIFO, COGS, 2006 = 352,000 + 253,400 + [600 x \$60] + [200 x \$56] = \$652,600 LIFO, EI, 2006

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