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Mgmt 200 Spring 2010 Exam 2 Solution

# Mgmt 200 Spring 2010 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 2010 Exam 2 – March 30, 2010 - SOLUTION This exam consists of 4 questions on 11 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 (26 points) ________ Question 2 (25 points) ________ Question 3 (24 points) ________ Question 4 (25 points) ________ TOTAL (100 points) ________

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Question 1: Inventory Accounting (26 points) Eagle Industries was formed in late 2007 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 2008 and 2009. Sales for the last three years were: Year Sales in units Sales in dollars 2007 6,000 \$180,000 2008 12,500 \$562,500 2009 13,800 \$828,000 Eagle Industries uses a periodic inventory system and provides the following information about cost of goods purchased since the company was formed: Purchase, November 2, 2007 7,800 units @ \$18.00 \$140,400 Purchase, March 18, 2008 6,000 units @ \$24.00 \$144,000 Purchase, August 5, 2008 7,200 units @ \$28.00 \$201,600 Purchase, April 13, 2009 7,200 units @ \$32.75 \$235,800 Purchase, June 28, 2009 6,300 units @ \$36.00 \$226,800 A physical inventory count at year-end, December 31, 2009 reveals 2,200 units still on hand. Required: a. How many units were on hand as at December 31, 2007? = 7,800 – 6,000 = 1,800 b. How many units were on hand as at December 31, 2008? = 1,800 + 13,200 – 12,500 = 2,500 [Note: 12/31/09 = 2,500 + 13,500 – 13,800 = 2,200 as given] Question 1 continued over . . . Mgmt 200 – Exam 2 – Spring 2010 – page 1
c. Compute Cost of Goods Sold and Ending Inventory for both 2008 and 2009 for Eagle Industries for each of the three inventory methods: Weighted average (WAVE), FIFO, and LIFO. WAVE FIFO LIFO Cost of goods sold, 2008 315,000 308,000 328,800 Inventory, December 31, 2008 63,000 70,000 49,200 Cost of goods sold, 2009 453,330 453,400 469,800 Inventory, December 31, 2009 72,270 79,200 42,000 Supporting calculations: WAVE 2008 = (32,400 + 144,000 + 201,600) / (1,800 + 6,000 + 7,200) = \$25.20 per unit WAVE 2009 = (63,000 + 235,800 + 226,800) / (2,500 + 7,200 + 6,300) = \$32.85 per unit EI LIFO 2008 = (1,800 x 18) + (700 x 24) EI LIFO 2009 = (1,800 x 18) + (400 x 24) Question 1 continued over . . . Mgmt 200 – Exam 2 – Spring 2010 – page 2

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Mgmt 200 Spring 2010 Exam 2 Solution - First name Last name...

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