Chapter 06 Transparency Masters-5025

# Chapter 06 Transparency Masters-5025 - Transparency Master...

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Transparency Master 6-1 INVENTORY VALUATION Strictly Classical At the beginning of the current year, John Bach opened a music store that sells compact discs of classical music. The store is called Strictly Classical. During the year, Strictly Classical purchased 10,000 compact discs for \$7 each. At the end of the year, a physical inventory count revealed that 1,000 of those discs were on hand. What value should be shown for ending inventory on the year-end balance sheet?

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Transparency Master 6-2 INVENTORY VALUATION Strictly Classical Assume that Strictly Classical purchased 10,000 compact discs as follows: No. of Discs Date Purchased Cost/Unit Total Cost Jan. 1 800 \$7.00 \$ 5,600 Mar. 8 2,200 \$7.50 16,500 June 23 4,000 \$7.25 29,000 Sept. 15 3,000 \$7.40 22,200 Total 10,000 \$73,300 If the year-end inventory reveals 1,000 discs on hand, what is the inventory value on the balance sheet? What is the store’s cost of merchandise sold?
INVENTORY VALUATION Strictly Classical Solution Method Ending Inventory Cost of Merchandise Sold FIFO 1,000 @ \$7.40 = \$7,400 800 @ \$7.00 = \$ 5,600 2,200 @ \$7.50 = 16,500 4,000 @ \$7.25 = 29,000 2,000 @ \$7.40 = 14,800 9,000 = \$65,900 OR Merchandise available \$73,300 – Ending inventory 7,400 \$65,900 LIFO 800 @ \$7.00 = \$5,600 3,000 @ \$7.40 = \$22,200 200 @ \$7.50 = 1,500 4,000 @ \$7.25 = 29,000 1,000 \$7,100 2,000 @ \$7.50 =

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Chapter 06 Transparency Masters-5025 - Transparency Master...

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