Question

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Q1:

XYZ Company uses a periodic inventory system. The beginning balance of inventory and the purchases made by XYZ during the month of July are given below:

Date	Description	Units	Unit cost	Total cost
July 01	Beginning inventory	500	$20	$10,000
July 18	Inventory purchased	800	$24	$19,200
July 25	Inventory purchased	700	$26	$18,200
	Total	2,000		$47,400

The XYZ Company sold 1,400 units during the month of July.

Required: Compute inventory on 31st July and cost of goods sold for the month of July using FIFO inventory costing method:

_______________

Q2:

ALPHA Company reported the following year-end information:

Cash	$ 52,000
Short-term investments	12,000
Accounts receivable	54,000
Inventory	325,000
Prepaid expenses	17,500
Accounts payable	106,500
Other current payables	25,000

Instructions:
1- Explain the purpose of the acid-test ratio.
2- Calculate the acid-test ratio for ALPHA Company.

Answer 1