Mgmt 200 Spring 2009 Exam 2 Solution

Mgmt 200 Spring 2009 Exam 2 Solution - First name Last name...

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First name: ___________ Last name: ______________ PUID: ________________________ Purdue University Krannert School of Management MGMT 200 – Introductory Financial Accounting Spring 2009 Exam 2 – March 24, 2009 – SOLUTION OUTLINE This exam consists of 4 questions on 13 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 (30 points) ________ Question 2 (20 points) ________ Question 3 (25 points) ________ Question 4 (25 points) ________ TOTAL (100 points) ________
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Question 1: Inventory Accounting (30 points) Eagle Industries was formed in 2006 to sell a single product, the Boomerang, which is imported from Australia. Due to price increases and fluctuating exchange rates the cost of this product increased during 2007 and 2008. Sales for the last three years were: Year Sales in units Sales in dollars 2006 3,500 $154,000 2007 8,000 $416,000 2008 13,000 $910,000 Eagle Industries uses a periodic inventory system and provides the following information about cost of goods purchased since the company was formed: Purchase, September 3, 2006 5,000 units @ $30.00 $150,000 Purchase, March 28, 2007 4,000 units @ $36.00 $144,000 Purchase, August 8, 2007 4,500 units @ $40.00 $180,000 Purchase, April 3, 2008 6,000 units @ $50.00 $300,000 Purchase, July 27, 2008 7,000 units @ $60.00 $420,000 A physical inventory count at year-end, December 31, 2008 reveals 2,000 units still on hand. Required: a. Compute Cost of Goods Sold and Ending Inventory for both 2007 and 2008 for Eagle Industries for each of the three inventory methods: Weighted average (WAVE), FIFO, and LIFO. WAVE FIFO LIFO Cost of goods sold, 2007 $295,200 $289,000 $306,000 Inventory, December 31, 2007 $73,800 $80,000 $63,000 Cost of goods sold, 2008 $687,960 $680,000 $720,000 Inventory, December 31, 2008 $105,840 $120,000 $63,000 (Show supporting calculations on the following page) Question 1 continued over . . . Mgmt 200 – Exam 2 – Spring 2009 – page 1
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Question 1 continued Supporting calculations: For all methods the opening inventory for 2007 is 1,500 at $30 = $45,000 WAVE (2007) = [45,000 + 144,000 + 180,000] / [1,500 + 4,000 + 4,500] = $36.90 COGS = 8,000 x $36.90 = $295,200 EI = 2,000 x $36.90 = $73,800 WAVE (2008) = [73,800 + 300,000 + 420,000] / [2,000 + 6,000 + 7,000] = $52.92 COGS = 13,000 x $52.92 = $687,960 EI = 2,000 x $52.92 = $105,840 FIFO, COGS, 2007 = 45,000 + 144,000 + [2,500 x $40] = $289,000 FIFO, EI, 2007 = [2,000 x $40] = $80,000 FIFO, COGS, 2008 = 80,000 + 300,000 + [5,000 x $60] = $680,000 FIFO, EI, 2008 = [2,000 x $60] = $120,000 LIFO, COGS, 2007 = 180,000 + [3,500 x $36] = $306,000 LIFO, EI, 2007 = 45,000 + [500 x $36] = $63,000 LIFO, COGS, 2008 = 300,000 + 420,000 = $720,000
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Mgmt 200 Spring 2009 Exam 2 Solution - First name Last name...

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