9.7 End-of-Chapter Exercises516
these units on September 1 for $20 each. The company buysanother 400 units for $7 each on November 1 and finishes YearOne with 500 units in stock.In Year Two, on February 1, the company sells 300 units for $20each. On July 1, Year Two, the company buys 200 more units for$9 each. On August 1, Year Two, the company sells 100 units for$25 each. Finally, on December 1, Year Two, the company buysanother 100 units for $10 each.a.Assume the company uses a perpetual FIFO system. What isthe cost of goods sold figure to be reported for Year Two?b.Assume the company uses a perpetual LIFO system. What isthe cost of goods sold figure to be reported for Year Two?12.A company applies LIFO and reports net income for Year Four of$328,000. Reported inventory at January 1 was $32,000 and at December31 was $35,000. A note to the financial statements indicates that thebeginning inventory would have been $52,000 and ending inventorywould have been $78,000 if FIFO had been used. What would thiscompany have reported as its net income for Year Four if FIFO has beenapplied as the cost flow assumption?13.The Montana Company and the Florida Company are identical in everyway. They have exactly the same transactions. In Year One, they bothstarted with 10,000 units of inventory costing $6 per unit. During YearOne, they both bought 20,000 additional units for $8 per unit and sold20,000 units. During Year Two, they both bought 30,000 units for $9 perunit and sold 30,000 units. The Montana Company uses a periodic FIFOsystem and the Florida Company uses a periodic LIFO system. If theMontana Company reports net income in Year Two of $100,000, whatwill the Florida Company report as its net income?14.The Furn Store sells home furnishings, including bean bag chairs.Furn currently uses the periodic FIFO method of inventorycosting, but is considering implementing a perpetual system. Itwill cost a good deal of money to start and maintain, so Furnwould like to see the difference, if any, between the two and isusing its bean bag chair inventory to do so. Here is the firstquarter information for bean bag chairs:Chapter 9 Why Does a Company Need a Cost Flow Assumption in Reporting Inventory?9.7 End-of-Chapter Exercises517
Figure 9.15Each bean bag chair sells for $40.a.Determine Furn’s cost of goods sold and ending inventoryunder periodic FIFO.b.Determine Furn’s cost of goods sold and ending inventoryunder perpetual FIFO.15.Rollrbladz Inc. is trying to decide between a periodic orperpetual LIFO system. Management would like to see the effectof each on cost of goods sold and ending inventory for the year.The following is information concerning purchases and sales ofits specialty line of rollerblades:Chapter 9 Why Does a Company Need a Cost Flow Assumption in Reporting Inventory?
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