Question

Chapter 7 question 1 The following information was taken from the purchasing and inventory records of Charity Company for inventory item #2103BL11: Date Units Cost per Unit 1/01/18 (Beg Inv) 300 $10 4/08/18 150 $11 7/10/18 120 12/03/18 $13 $12 100 A physical inventory count was performed on December 31, 2018. The quantity of inventory counted for item # 2103BL11 was 345. Each unit of inventory is sold for $20 per unit. Using the FIFO and LIFO methods of inventory costing (assume the periodic method of inventory is used), compute the following: Show your computations. FIFO LIFO Sales Revenue Cost of Sales Gross Profit FIFO Ending Inventory Chapter 7 question 2 Amil & Ashwin Company's auditor discovered that the company inadvertently understated ending inventory for the prior year. If the error is not corrected, what effect will the error have on the following financial statement items for both the prior year and the current year? Assume the ending inventory for the current year was properly stated (no error). Indicate in each box a "+" (plus) if the item is overstated, a"-" (minus) if the item is understated, and a "N/A" if there is no effect on the item. Prior Year Current Year Effect on Income Statement Goods Available for Sale Cost of Goods Sold Gross Profit Net Income Effect on Balance Sheet Inventory on 12/31 Retained Earnings on 12/31

Answer 1

Chapter 7, Question 1

	FIFO	LIFO
Sales Revenue (325 * 20)	6500	6500
Cost of Sales ( Note 2)	3325	3805
Gross Profit	3175	2695

Ending Inventory
		FIFO	LIFO
12-03-2018	75*13	975
04-08-2018	150*11	1650
07-10-2018	120*12	1440
12-03-2018	45*13		585
Beginning	300 *10		3000
Ending Inventory		4065	3585

Notes

Note 1.

Quantity sold for the year = Beginning inventory + Purchase - Closing Inventory
Quantity sold for the year	300 + 150 + 120 + 100- 345
Quantity sold for the year	325

Note 2.

COGS
		FIFO	LIFO
Beginning	300 * 10	3000
12-03-2018	25*13	325
07-10-2018	120 * 12		1440
04-08-2018	150*11		1650
12-03-2018	55 * 13		715
COGS		3325	3805