# Refer to the cole company information in table 7 5

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Chapter 6 / Exercise EX 6–10
Financial and Managerial Accounting Using Excel for Success
Reeve/Warren
Expert Verified
111. Refer to the Cole Company information in Table 7-5. Assume the company is trying to decide between the periodic method and the perpetual method. Cole has decided to use the last-in-first-out cost flow assumption. Determine the cost of goods sold for the month of March, 20X4 and the ending inventory balance at March 31, 20X4, using both the perpetual method and the periodic method. L.O.: 4Type: DifficultSolution:The perpetual focuses upon sales, periodic focuses upon purchases. This problem demonstrates this to the student. Note that 750 units were sold, 450 units are in ending inventory, and the total dollar amount of ending inventory and cost of goods sold must equal \$6,220.LIFO perpetual methodCost of goods soldMarch 5 sale 200 units @ \$5.00 \$1,000March 15 sale 300 units @ \$5.20 1,56020 units @ \$5.00 100March 25 sale 230 units @ \$5.40 1,242\$3,902Ending inventory280 units @ \$5.00 \$1,400170 units @ \$5.40 918\$2,318LIFO periodic inventory methodCost of goods sold March 20 purchase 400 units @ \$5.40 \$2,160March 10 purchase 300 units @ \$5.20 1,560March 1 purchase 50 units @ \$5.00 250\$3,970LIFO ending inventoryMarch 1 purchase 450 units @ \$5.00 \$2,250203
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Chapter 6 / Exercise EX 6–10
Financial and Managerial Accounting Using Excel for Success
Reeve/Warren
Expert Verified
112. Murray Inc had the following inventory balance as of June 30, 20X4.June 3 order of 400 units @ \$10.50 \$ 4,200June 8 order of 100 units @ \$11.00 1,100June 19 order of 200 units @ \$11.50 2,300\$ 7,600On July 1, 20X4, the company sold 240 units at \$16.00 per unit. On July 10, 20X4, a competitor announced a new model which resulted in the cost of Murray inventory dropping to the new replacement cost, which was \$10.75. Murray Inc uses a perpetual inventory system.1. What is the balance in the inventory account on July 9, 20X4, if Murray Inc uses:a. FIFO?b. LIFO?2. What journal entry is necessary on July 10, 20X4, if Murray Inc uses lower-of-cost-or-market, where cost is defined as:a. FIFO?b. LIFO?L.O.: 6Type: DifficultSolution:1a. FIFO.160 units @ \$10.50 \$ 1,680100 units @ \$11.00 1,100200 units @ \$11.50 2,300\$ 5,0801b. LIFO.400 units @ \$10.50 \$4,20060 units @ \$11.00 660\$4,8602a. FIFO Loss on Write-down of Inventory 175Inventory 175[(200 units x (\$11.50 - \$10.75)) + (100 units x (\$11 - \$10.75))]2b. LIFO.Loss on Write-down of Inventory 15Inventory 15(60 units x (\$11.00 - \$10.75))204
113. Presented below are the income statements for Shaw Company for the years ended December 31, 20X4, 20X3, and 20X2.The Shaw CompanyComparative Income StatementsFor years ending December 3120X420X320X2Sales \$910 \$790 \$620Less: Cost of Goods Sold: Beginning Inventory 90 70 Purchases 550510420Goods Available for Sale 640 580 Less: Ending Inventory 809070Cost of Goods Sold 560490410Gross Profit 350 300 Less: Operating Expenses 706050Income Before Taxes 280 240 Income Tax Expense (40%) 1129664Net Income \$168\$144\$ 96In 20X5 it was discovered that the 20X2 ending inventory was understated by \$20, and the 20X4 ending inventory was overstated by \$10. The 20X2 beginning inventory and the 20X3 ending inventory were correctly stated.Identify the accounts which are incorrect on the 20X2, 20X3, and 20X4 income statements. State the dollar error (by how much they are incorrect) and whether the amounts overstate or understate balances. 60480210160L.O.: 7Type: DifficultSolution:The Shaw CompanyComparative Income StatementsFor years ending December 3120X420X320X2Sales \$910 \$790 \$620Less: Cost of goods sold Beginning inventory 90 70 (\$20 under) 60 Purchases 550510420