Question

Computing Cost of Sales and Ending Inventory Stocken Company has the following financial records for the...

Computing Cost of Sales and Ending Inventory
Stocken Company has the following financial records for the current period:

Units Unit cost
Beginning inventory 100 $48
Purchases #1 650 44
#2 550 40
#3 200 38


Ending inventory at the end of this period is 350 units. Compute the ending inventory and the cost of goods sold for the current period using (a) first-in, first-out, (b) average cost, and (c) last-in, first-out.

FIFO Average cost LIFO
Cost of goods sold Answer Answer Answer
Ending inventory

Answer

Answer

Answer

Determining Lower of Cost or Net Realizable Value (NRV)

Crane Company had the following inventory at December 31, 2017.

Unit Price
Quantity Cost NRV
Desks
Model 9001 71 $190 $210
Model 9002 46 280 268
Model 9003 21 350 360
Cabinets
Model 7001 121 60 64
Model 7002 81 95 88
Model 7003 51 130 126

a. Determine the ending inventory amount by applying the net realizable value rule to:
1. Each item of inventory.
$Answer

2. Each major category of inventory.
$Answer

3. Total inventory.
$Answer

Analyzing Inventory Footnote Disclosure
General Motors Corporation reported the following information in its 10 -K report:

Inventories at December 31 ($ millions) 2008 2007
Productive material, work in process, and supplies $5,077 $6,495
Finished product, service parts, etc.

9,654

10,323

Total inventories at FIFO 14,731 16,818
Less LIFO allowance

(1,261)

(1,451)

Total automotive and other inventories, less allowances

$13,470

$15,367


The company reports its inventory using the LIFO costing method during 2007 and 2008.


a. At what dollar amount are inventories reported on its 2008 balance sheet?
$Answer million

b. At what dollar amount would inventories have been reported in 2008 if FIFO inventory costing had been used?
$Answer million

c. What cumulative effect has the use of LIFO had, as of year-end 2008, on GM's pretax income, compared to the pretax income that would have been reported using the FIFO costing method?
Pretax income has Answerdecreasedincreased by $Answer million cumulatively since GM adopted LIFO inventory costing.

d. Assuming a 35 % income tax rate, what is the cumulative effect on GM's tax liability as of year-end 2008 ?
(Round answer to one decimal place.)
Cumulative taxes have Answerdecreasedincreased by $Answer million by the use of LIFO costing.

Calculating Gross Profit Margin and Inventory Turnover
The following table presents sales revenue, cost of goods sold, and inventory amounts for three retailers of fine jewelry, Tiffany & Co., Zale Corporation, and Blue Nile, Inc. (an Internet retailer).

($ millions) 2013 2012
Tiffany & Co.
Revenues $4,131 $3,879
Cost of goods sold 1,741 1,666
Inventory 2,427 2,334
Zale Corporation
Revenues $1,938 $1,902
Cost of goods sold 954 941
Inventory 793 757
Blue Nile, Inc.
Revenues $475 $435
Cost of goods sold 416 360
Inventory 60 48


a. Compute the gross profit margin (GPM) for each of these companies for 2013 and 2012.
Note: Round GPM answers to one decimal place (ex: 0.2345 = 23.5%).

Tiffany Zale Blue Nile
2013 2012 2013 2012 2013 2012
Gross profit Answer Answer Answer Answer Answer Answer
Gross profit margin (GPM) Answer

%

Answer % Answer % Answer % Answer % Answer %


b. Compute the inventory turnover ratio and the average inventory days outstanding for 2013 for each company.

Do not round until your final answer.

Round inventory turnover to one decimal place. Round average inventory days outstanding to nearest whole number.

Tiffany Zale Blue Nile
Inventory turnover Answer Answer Answer
Avg. inventory days outstanding Answer Answer Answer
0 0
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Answer #1
Stocken Company
Description Quantity Cost per units Total cost Units sold
Beginning Inventory 100 $                       48.00 $       4,800.00
Purchases 650 $                       44.00 $     28,600.00
Purchases 550 $                       40.00 $     22,000.00
Purchases 200 $                       38.00 $       7,600.00
Sales Units=(1500-350) 1150
Total 1500 $     63,000.00 1150
Closing Inventory=(Beginning Inventory+Purchases-Sales)
Closing Inventory=(100+650+550+200-1150)=350 units
Average Method
Unit Price= Total cost/Total Units
Unit Price= ($63000/1500)
Unit Price= $                                    42.00
Average-Ending Inventory
Unit Rate Total cost
Ending Inventory 350 $                       42.00 $     14,700.00
Average-Cost of goods sold
Unit Rate Total cost
Cost of goods sold 1150 42 $     48,300.00
FIFO Ending Inventory
Units Rate Total cost
#3 Purchase 200 $                       38.00 $       7,600.00
# 2 Purchase 150 $                       40.00 $       6,000.00
Total 350 $     13,600.00
FIFO-Cost of goods sold
Units Rate Total cost
Beginning Inventory 100 $                       48.00 $       4,800.00
#1 Purchase 650 $                       44.00 $     28,600.00
# 2 Purchase 400 $                       40.00 $     16,000.00
Total 1150 $     49,400.00
LIFO Ending Inventory
Units Rate Total cost
Beginning Inventory 100 $                       48.00 $       4,800.00
#1 purchase 250 $                       44.00 $     11,000.00
Total 350 $     15,800.00
LIFO-Cost of goods sold
Units Rate Total cost
# 3 Purchase 200 $                       38.00 $       7,600.00
# 2 Purchase 550 $                       40.00 $     22,000.00
# 1 Purchase 400 $                       44.00 $     17,600.00
1150 $     47,200.00
Under LIFO Inventory method units purchased last is sold first.
Ending Inventory Cost of goods sold
a) Average Method $                           14,700.00 $               48,300.00
b)FIFO Method $                           13,600.00 $               49,400.00
c ) LIFO Method $                           15,800.00 $               47,200.00
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