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