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ACC-1A Lecture Notes - Lecture 11: Perpetual Inventory, Financial Statement, Income Statement

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lemonwasp425
8 Sep 2020
School
RCC
Department
Accounting
Course
ACC-1A
Professor
Rangel

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Document Summary

The three commonly used costing methods in perpetual inventory systems are specific. Identification, and two assumption methods: fifo and lifo. The average cost method (which is used in periodic) is not generally used in perpetual inventory systems, so it is not presented. Note: lifo is not permitted under international reporting standards (ifrs). The method keeps track of the exact cost of each and every inventory item. For example, think of a used car where a red 1968 corvette was purchased for cash on june 1 by the company for ,000 and put on the lot with a sales price in the window of ,000. Also purchased with cash, was a blue 1966 mustang convertible on july 14. It cost the company ,000 and has a window sales price of ,000. The record the purchase of the two inventory items:: It depends on whether the cost of inventory inventor is rising or declining.

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Related Questions

During January, a companythat uses a perpetual inventory system had beginning inventory,purchases, and sales as follows:
Units Unit cost

Beggininginventory 100 10

Jan 5purchased 40 12

Jan 10sold 60

Jan 15purchased 70 13

Jan 25sold 50

** The selling priceper unit is $20.

1. Using the perpetual inventory system, calculate the total cost ofgoods sold for January and cost of the company's January31st inventory for the following methods. Show all your work using the format used in thetext!

a) FIFO

b) LIFO

c) Weighted average

d) Prepare journal entries for the events listed in the questionusing the amounts calculated using in (a) FIFO method.

2. Using the periodic inventory system, calculate the cost of goodssold for January and cost of the company's January 31stinventory for the following methods. Showall your work using the format provided in the appendix of thechapter in the text!

a) FIFO

b) LIFO

c) Weighted average



3. A company made thefollowing purchases during the year:


Jan 10: 15 units @ 360each

Mar 25: 25 units @390each

April 25: 10 units @ 420each

July 30: 20 units @ 450each

Oct 10: 15 units @ 480each



On December 31, there were28 units in ending inventory. These 28 units consisted of 1 fromthe January 10 purchase, 2 from the March 15 purchase, 5 from theApril 25 purchase, 15 from the July 30 purchase, and 5 from theOctober 10 purchase. Using perpetual inventory system, calculatethe cost goods sold and ending inventory for the year using thespecific identification method. Show all your work using the format provided in the text!(Note: Answers do not differ using the periodic inventorysystem)


4. Monitor Company usesthe LIFO method for valuing its ending inventory. The followingfinancial statement information is available for its first year ofoperation:

Income Statement

For the year ended Dec31


Sales 50,0000

Cost of goodssold 23,000

Grossprofit 27,000

Expenses 13,000

Income beforetaxes 14,000





Monitor's ending inventoryusing the LIFO method was $8,200. Monitor's accountant determinedthat, had the company used FIFO, the ending inventory would havebeen $8,500.

a) Determine what the income beforetaxes would have been, had Monitor used the FIFO method ofinventory valuation instead of LIFO.

b) What would be the difference in income taxesbetween LIFO and FIFO, assuming a 30% tax rate?

c) If Monitor wanted to lower the amount of income taxes to be paid, whichmethod would it choose?



Some of the information found on a detail inventory card for Sage Inc. for the first month of operations is as follows.

Received

Date

No. of Units

Unit Cost

Issued,
No. of Units

Balance,
No. of Units
January 2 1,600 $4.65 1,600
7 1,100 500
10 1,000 4.96 1,500
13 900 600
18 1,400 5.12 700 1,300
20 1,100 200
23 1,700 5.27 1,900
26 1,200 700
28 2,000 5.43 2,700
31 1,700

1,000

1. If the perpetual inventory record is kept in dollars, and costs are computed at the time of each withdrawal, what amount would be the amount of the ending inventory?

*THIS IS A PERPETUAL INVENTORY RECORD SYSTEM. Everyone keeps giving me the periodic answers. I need PERPETUAL. Please help me, my teacher did not go over this in class.


During January, a companythat uses a perpetual inventory system had beginning inventory,purchases, and sales as follows:
Units Unit cost

Beggininginventory 100 10

Jan 5purchased 40 12

Jan 10sold 60

Jan 15purchased 70 13

Jan 25sold 50


** The selling priceper unit is $20.



2. Using theperiodic inventory system, calculatethe cost of goods sold for January and cost of the company'sJanuary 31st inventory for the followingmethods. Show all your work using theformat provided in the appendix of the chapter in thetext!



a) FIFO


b) LIFO


c) Weighted average





3. A company made thefollowing purchases during the year:


Jan 10: 15 units @ 360each

Mar 25: 25 units @390each

April 25: 10 units @ 420each

July 30: 20 units @ 450each

Oct 10: 15 units @ 480each



On December 31, there were28 units in ending inventory. These 28 units consisted of 1 fromthe January 10 purchase, 2 from the March 15 purchase, 5 from theApril 25 purchase, 15 from the July 30 purchase, and 5 from theOctober 10 purchase. Using perpetual inventory system, calculatethe cost goods sold and ending inventory for the year using thespecific identification method. Show all your work using the format provided in the text!(Note: Answers do not differ using the periodic inventorysystem)




4. Monitor Company usesthe LIFO method for valuing its ending inventory. The followingfinancial statement information is available for its first year ofoperation:

Income Statement

For the year ended Dec31


Sales 50,0000

Cost of goodssold 23,000

Grossprofit 27,000

Expenses 13,000

Income beforetaxes 14,000





Monitor's ending inventoryusing the LIFO method was $8,200. Monitor's accountant determinedthat, had the company used FIFO, the ending inventory would havebeen $8,500.



a) Determine what the income before taxeswould have been, had Monitor used the FIFO method of inventoryvaluation instead of LIFO.


b) Whatwould be the difference in income taxes between LIFO and FIFO,assuming a 30% tax rate?


c) IfMonitor wanted to lower the amount ofincome taxes to be paid, which method would itchoose?