2. Snoslope sells a snowboard, Xpert, that is popular with snowboard enthusiasts (A+)

Snoslope sells a snowboard, Xpert, that is popular with snowboard enthusiasts. Below is information relating to Snoslope\’s purchases of Xpert snowboards during September. During the same month, 118 Xpert snowboards were sold. Snoslope uses a periodic inventory system.

Date Explanation Units Unit Cost Total Cost

Sept. 1 Inventory 14 $100 $1,400

Sept. 12 Purchases 45 102 4,590

Sept. 19 Purchases 20 104 2,080

Sept. 26 Purchases 50 105 5,250

Totals 129 $13,320

Requirement:

(a) Compute the ending inventory at September 30 using the FIFO and LIFO methods.

(b) For both FIFO and LIFO, calculate the sum of ending inventory and cost of goods sold.

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Leavenworth Bank and Trust is considering giving Mabry Company a loan (A+)

Leavenworth Bank and Trust is considering giving Mabry Company a loan. Before doing so, they decide that further discussions with Mabry\’s accountant may be desirable. One area of particular concern is the inventory account, which has a year-end balance of $275,000. Discussions with the accountant reveal the following.

Determine the correct inventory amount on December 31, by filling in the beginning inventory and adjustments for each item listed below to arrive at corrected inventory

Requirement:

Mabry sold goods costing $55,000 to Ace Company FOB shipping point on December 28. The goods are not expected to reach Ace until January 12. The goods were not included in the physical inventory because they were not in the warehouse.

2. The physical count of the inventory did not include goods costing $95,000 that were shipped to Mabry FOB destination on December 27 and were still in transit at year-end.

3. Mabry received goods costing $25,000 on January 2. The goods were shipped FOB shipping point on December 26 by Lenny Co. The goods were not included in the physical count.

4. Mabry sold goods costing $51,000 to Flanders of Canada FOB destination on December 30. The goods were received in Canada on January 8. They were not included in Mabry\’s physical inventory.

5. Mabry received goods costing $37,000 on January 2 that were shipped FOB destination on December 29. The shipment was a rush order that was supposed to arrive December 31. This purchase was included in the ending inventory of $275,000.

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Ringler Company reports net income of $89,000 in 2012 (A+)

Ringler Company reports net income of $89,000 in 2012. However, ending inventory was understated by $7,000. What is the correct net income for 2012?

What effect, if any, will this error have on total assets as reported in the balance sheet at December 31, 2012?

The understatement of ending inventory caused cost of goods sold to be overstated $7,000 and net income to be understated $7,000. The correct net income for 2012 is $96,000 ($89,000 + $7,000).

Total assets in the balance sheet will be understated by the amount that ending inventory is understated, $7,000.

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Dakin’s Department Store uses a perpetual inventory system (A+)

Dakin\’s Department Store uses a perpetual inventory system. Data for product E2-D2 include the following purchases.

Date Number of Units Unit Price

May 7 50 $10

July 28 30 $15

On June 1 Dakin sold 30 units, and on August 27, 33 more units. Compute the cost of goods sold using (1) FIFO, (2) LIFO, and (3) average cost. (For the average cost computation, round the per unit cost to 0 decimal places, e.g. 15.)

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Winnebago Industries, Inc. is a leading manufacturer of motor homes (A+)

Winnebago Industries, Inc. is a leading manufacturer of motor homes. Winnebago reported ending inventory at August 25, 2007, of $101,208,000 under the LIFO inventory method. In the notes to its financial statements, Winnebago reported a LIFO reserve of $32,705,000 at August 25, 2007. What would Winnebago Industries\’ ending inventory have been if it had used FIFO?

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At December 31, 2006, the following information (in thousands) was available for sunglasses manufacturer Oakley, Inc (A+)

At December 31, 2006, the following information (in thousands) was available for sunglasses manufacturer Oakley, Inc.: ending inventory $155,377; beginning inventory $119,035; cost of goods sold $349,114; and sales revenue $761,865. Calculate the inventory turnover ratio and days in inventory for Oakley, Inc. (Round the inventory turnover ratio to 3 decimal places, e.g. 1.205 and the days in inventory to 0 decimal places, e.g. 120.)

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2. O’Connor Video Center accumulates the following cost and market data at December 31 (A+)

O’Connor Video Center accumulates the following cost and market data at December 31.

Inventory Categories Cost Data Market Data

Cameras $12,500 $13,400

Camcorders 9,000 9,500

DVD\’s 13,000 12,800

Compute the lower of cost or market valuation for O\’Connor\’s inventory.

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For each of the following cases, state whether the statement is true for LIFO or for FIFO (A+)

For each of the following cases, state whether the statement is true for LIFO or for FIFO. Assume that prices are rising.

(a) Results in a higher quality of earnings ratio.

(b) Results in higher phantom profits.

(c) Results in higher net income.

(d) Results in lower taxes.

(e) Results in lower net cash provided by operating activities.

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In its first month of operation, Maze Company purchased 100 units of inventory for $6, then 200 units for $7, and finally 150 units for $8 (A+)

In its first month of operation, Maze Company purchased 100 units of inventory for $6, then 200 units for $7, and finally 150 units for $8. At the end of the month, 180 units remained. Compute the amount of phantom profit that would result if the company used FIFO rather than LIFO. The company uses the periodic method

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The management of Eckel Corp. is considering the effects of various inventory costing methods on its financial statements and its income tax expense (A+)

he management of Eckel Corp. is considering the effects of various inventory costing methods on its financial statements and its income tax expense. Assuming that the price the company pays for inventory is increasing, which method will:

(a) Provide the highest net income?

(b) Provide the highest ending inventory?

(c) Result in the lowest income tax expense?

(d) Result in the most stable earnings over a number of years?

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