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Q19E

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Intermediate Accounting (Kieso)
Found in: Page 429

Short Answer

Question: Tori Amos Corporation began operations on December 1, 2016. The only inventory transaction in 2016 was the purchase of inventory on December 10, 2016, at a cost of $20 per unit. None of this inventory was sold in 2016. Relevant information is as follows.

Ending inventory units

December 31, 2016 100

December 31, 2017, by purchase date

December 2, 2017 100

July 20, 2017 50 150

During the year, the following purchases and sales were made.

Purchases Sales

March 15 300 units at $24 April 10 200

July 20 300 units at 25 August 20 300

September 4 200 units at 28 November 18 150

December 2 100 units at 30 December 12 200

The company uses the periodic inventory method.

Instructions

(a) Determine ending inventory under (1) specific identification, (2) FIFO, (3) LIFO, and (4) average cost.

(b) Determine ending inventory using dollar-value LIFO. Assume that the December 2, 2017, purchase cost is the current cost of inventory. (Hint: The beginning inventory is the base layer priced at $20 per unit.)

Ending inventory under the given methods are as follow –

Specific Identification $4,250

FIFO $4,400

LIFO $3,200

Average $3,795

Dollar value LIFO $3,500

See the step by step solution

Step by Step Solution

Determination of ending inventory

(1) Ending inventory by specific identification

(2) Ending inventory at FIFO

(3) Ending inventory at LIFO

(4) Ending inventory at Average cost

Step 2: Ending inventory at dollar value LIFO

So the ending inventory at dollar value LIFO is $3,500.

Most popular questions for Business-studies Textbooks

Colin Davis Machine Company maintains a general ledger account for each class of inventory, debiting such accounts for increases during the period and crediting them for decreases. The transactions below relate to the Raw Materials inventory account, which is debited for materials purchased and credited for materials requisitioned for use.

1. An invoice for $8,100, terms f.o.b. destination, was received and entered January 2, 2017. The receiving report shows that the materials were received December 28, 2016.

2. Materials costing $28,000, shipped f.o.b. destination, were not entered by December 31, 2016, “because they were in a railroad car on the company’s siding on that date and had not been unloaded.”

3. Materials costing $7,300 were returned to the supplier on December 29, 2016, and were shipped f.o.b. shipping point. The return was entered on that date, even though the materials are not expected to reach the supplier’s place of business until January 6, 2017.

4. An invoice for $7,500, terms f.o.b. shipping point, was received and entered December 30, 2016. The receiving report shows that the materials were received January 4, 2017, and the bill of lading shows that they were shipped January 2, 2017.

5. Materials costing $19,800 were received December 30, 2016, but no entry was made for them because “they were ordered with a specified delivery of no earlier than January 10, 2017.”

Instructions -

Prepare correcting general journal entries required at December 31, 2016, assuming that the books have not been closed.

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