Question

37. Inventory records for MOM Company revealed the following Number Date Mar. 1 Mar. 6 Mar. 16 Mar. 23 Transaction Beginning inventory Purchase Purchase Purchase Unit Cost $70.00 $70.20 $71.00 1.000 1,000 1,000 $71.10 MOM sold 3.300 units of inventory during the month Ending inventory assuming UFO would be s 38. Inventory records for STC Company revealed the following: Number of Units Date Mar. 1 Mar. 3 Mar. 23 Transaction Beginning inventory Purchase Purchase Unit cost $25.00 $25.25 $26.00 800 150 STC sold 975 units of inventory during the month. Ending inventory assuming weighted Average would be Use the following to answer questions 39-40 MATCH... For each of the following independent situations, fill in the blanks to indicate the effect of the error on each of the various financial statement items. Assume that each of the companies uses a periodic inventory system Indicate: (A) an understatement (B) an overstatement or (C) no effect, correct Error Balance Sheet Income Statement Ending Retained Cost of Net Income Inventory Earnings Goods Sold a. A b. c. 3 d. A a. b. c. d B 39. Understated El in year 1, affect on items in year 1. 40. Understated El in year 1, affect on items in year 2. Chapter 6 Page 6-5

Answer 1

37.	FIFO method
		Purchase(receipt)				Sale				Balance
	Date	Qty.	Rate	Amount		Qty.	Rate	Amount(Rs.)		Qty.	Rate	Amount
Beg. Bal.	01-Mar	400	70	$28,000
	06-Mar	1000	70.2	$70,200
	16-Mar	1000	71	$71,000
	23-Mar	1000	71.1	$71,100
						400	70	$28,000
						1000	70.2	$70,200
						1000	71	$71,000
						900	71.1	$63,990		100	71.1	$7,110
	ENDING INVENTORY assuming FIFO =			$7,110
		No. of units	unit cost	Amount
38.	Begin. Inventory	50	$25	$1,250
	03-Mar	800	25.25	$20,200
	23-Mar	150	26	$3,900
		1000		$25,350
	Average cost	$25.35	(25350/1000)
	Closing stock units	25	(1000-975)
	Closing stock value	$633.75	(25.35*25)

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