Chapter 12
Ex. 1
Shellan Kamp Company identifies the following items for possible inclusion in the physical inventory. Indicate
whether each item should be included or excluded from the inventory taking.
1. Goods held on consignment from another company.
2. Goods shipped on consignment by Shellan Kamp to another company.
3. Goods in transit from a supplier shipped FOB destination.
4. Goods shipped via common carrier to a customer with terms FOB shipping point.
Solution 1
1.
2.
3.
4.
Excluded
Included
Excluded
Excluded
Ex. 2
In the first month of operations, Dieker Company made three purchases of merchandise in the following sequence:
(1) 200 units at $7, (2) 300 units at $8, and (3) 400 units at $6. Assuming there are 350 units on hand, compute the
cost of the ending inventory under the FIFO method. Dieker uses a periodic inventory system.
Solution 2
350 x $6 = $2,100
Ex. 3
The Entertainment Center accumulates the following cost and market data at December 31.
Inventory Categories
Camera
Camcorders
DVDs
Cost Data
$11,000
8,000
13,000
Market Data
$11,600
7,800
12,700
What is the lower-of-cost-or-market value of the inventory?
Solution 3
Inventory Categories
Camera
Camcorders
DVDs
Cost Data
$11,000
8,000
13,000
Market Data
$11,600
7,800
12,700
Lower of cost or market value
$11,000
7,800
12,700
$31,500
Ex. 4
At December 31, 2012, the following information (in thousands) was available for Kitselman Inc.: ending inventory
$21,600; beginning inventory $22,400; cost of goods sold $187,000; and sales revenue $420,000. Calculate the
inventory turnover ratio and days in inventory for Kitselman.
Solution 4
Inventory Turnover Ratio =
$187,000
($21,600 + $22,400)/2
= 8.5 times
Days in Inventory =
365
8.5
= 42.9 days
Ex. 5
Hess Company's inventory records show the following data for the month of September:
Inventory, September 1
Purchases: September 8
September 18
Units
220
350
250
Unit Cost
$3.00
3.50
3.70
A physical inventory on September 30 shows 200 units on hand.
Calculate the value of ending inventory and cost of goods sold if the company uses FIFO inventory costing and a
periodic inventory system.
Solution 5
Ending inventory of 200 units: 200 × $3.70 = $740
Cost of goods sold:
Units available for sale (220 + 350 + 250) = 820
Units sold 820 – 200 = 620
220 × $3
350 × $3.50
50 × $3.70
Cost of goods sold
=
=
=
$ 660
1,225
185
$ 2,070