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?
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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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