Mgmt 200 Fall 2008 Exam 2 solution

Mgmt 200 Fall 2008 Exam 2 solution - Name: _ PUID: _ Purdue...

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Name: ________________________ PUID: ________________________ Purdue University Krannert School of Management MGMT 200 – Introductory Financial Accounting Fall 2008 Exam 2 – November 11, 2008 - SOLUTION This exam consists of 4 questions on 12 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 (25 points) ________ Question 2 (25 points) ________ Question 3 (25 points) ________ Question 4 (25 points) ________ TOTAL (100 points) ________
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Question 1: Inventory Accounting (25 points) Dewar Imports was formed in late 2002 to sell a single product, the Vegematic, which is imported from Australia. Due to price increases and fluctuating exchange rates the cost of this product increased during 2006 and 2007. Sales for 2007 were $382,500 or 8,500 units (sales for 2006 totaled $348,000 or 8,700 units). Dewar uses a periodic inventory system and provides the following information about cost of goods purchased during the last two years: Opening Inventory (12/31/05) 1,600 units @ $22.00 $35,200 Purchase, April 16, 2006 6,300 units @ $25.00 $157,500 Purchase, July 28, 2006 2,100 units @ $28.00 $58,800 Purchase, March 23, 2007 6,500 units @ $32.57 $211,705 Purchase, September 3, 2007 2,600 units @ $38.00 $98,800 A physical inventory count at year-end, December 31, 2007 reveals 1,900 units still on hand (inventory on hand at December 31, 2006 was 1,300 units). Required: A. Compute Cost of Goods Sold and Ending Inventory for both 2006 and 2007 for Dewar Imports for each of the three inventory methods: Weighted average (WAVE), FIFO, and LIFO. WAVE FIFO LIFO Cost of goods sold, 2006 $218,805 $215,100 $222,900 Inventory, December 31, 2006 $32,695 $36,400 $28,600 Cost of goods sold, 2007 $280,500 $274,705 $290,963 Inventory, December 31, 2007 $62,700 $72,200 $48,142 (Show supporting calculations on the following page) Question 1 continued over . . . Mgmt 200 – Exam 2 – Fall 2008 – page 1
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Supporting calculations: WAVE (2006) = [35,200 + 157,500 + 58,800] / [1,600 + 6,300 + 2,100] = $25.15 COGS = 8,700 x $25.15 = $218,805 EI = 1,300 x $25.15 = $32,695 WAVE (2007) = [32,695 + 211,705 + 98,800] / [1,300 + 6,500 + 2,600] = $33.00 COGS = 8,500 x $33.00 = $280,500 EI = 1,900 x $33.00 = $62,700 FIFO, COGS, 2006 = 35,200 + 157,500 + [800 x $28] = $215,100 FIFO, EI, 2006 = [1,300 x $28] = $36,400 FIFO, COGS, 2007 = 36,400 + 211,705 + [700 x $38] = $272,705 FIFO, EI, 2007 = [1,900 x $38] = $72,200 LIFO, COGS, 2006 = 58,800 + 157,500 + [300 x $22] = $222,900 LIFO, EI, 2006 = [1,300 x $22] = $28,600 LIFO, COGS, 2007 = 98,800 + [5,900 x 32.57] = $290,963 LIFO, EI, 2007 = [1,300 x $22] + [600 x 32.57] = 48,142 Question 1 continued over . . . Mgmt 200 – Exam 2 – Fall 2008 – page 2
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Mgmt 200 Fall 2008 Exam 2 solution - Name: _ PUID: _ Purdue...

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