Some of L and K Electronics’s merchandise is gathering dust. It is now December 31, 2018, and the current replacement cost of the ending merchandise inventory is$32,000 below the business’s cost of the goods, which was $98,000. Before any adjustmentsat the end of the period, the company’s Cost of Goods Sold account has a balanceof $410,000.
3. At what amount should the company report cost of goods sold on the incomestatement?
COGS would be reported for $476,000 in the income statement.
The cost of goods sold is the direct material cost incurred for producing goods or services. This direct material cost includes raw material cost, transportation cost, installation cost, and any other value reduction in the inventory in the normal course of business.
In the given case, the COGS has already been given at the value of $410,000. But there is a loss in inventory value due to the LCM rule. This loss has been adjusted to COGS in the previous sub-part.
So the new value of COGS to be reported on the balance sheet would be –
Steel Mill began August with 50 units of iron inventory that cost $35 each. During August, the company completed the following inventory transactions:
Units Unit Cost Unit Sales Price
Aug. 3 Sale 45 $ 85
8 Purchase 90 $ 54
21 Sale 85 88
30 Purchase 15 58
3. Prepare a perpetual inventory record for the merchandise inventory using the weighted-average inventory costing method.
Question: Golf Unlimited carries an inventory of putters and other golf clubs. The sales price of each putter is $119. Company records indicate the following for a particular line ofGolf Unlimited’s putters:
Date Item Quantity Unit Cost
Nov. 1 Balance 24 $ 53
6 Sale 20
8 Purchase 30 70
17 Sale 30
30 Sale 2
2. Journalize Golf Unlimiteds inventory transactions using the LIFO inventory costingmethod. (Assume purchases and sales are made on account.)
Some of M and C Electronics’s merchandise is gathering dust. It is now December 31, 2018, and the current replacement cost of the ending merchandise inventory is $24,000 below the business’s cost of the goods, which was $97,000. Before any adjustments at the end of the period, the company’s Cost of Goods Sold account has a balance of $380,000.
4. Which accounting principle or concept is most relevant to this situation?
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