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Inventory Valuation Methods Exercises

This document contains 5 exercises involving inventory valuation using different cost flow assumptions. Exercise 1 asks to calculate inventory using the gross profit method. Exercise 2 asks to calculate ending inventory given beginning inventory, purchases, sales and gross profit percentage. Exercise 3 provides inventory, purchase and sales data and asks to calculate cost of goods sold and ending inventory under FIFO, LIFO and average costing assuming a periodic system. Exercise 4 is the same as 3 but assumes a perpetual system. Exercise 5 provides additional inventory and purchase data and asks to calculate cost of goods sold and ending inventory under FIFO and LIFO, and to identify which method produces a higher ending inventory and cost of goods sold.

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199 views2 pages

Inventory Valuation Methods Exercises

This document contains 5 exercises involving inventory valuation using different cost flow assumptions. Exercise 1 asks to calculate inventory using the gross profit method. Exercise 2 asks to calculate ending inventory given beginning inventory, purchases, sales and gross profit percentage. Exercise 3 provides inventory, purchase and sales data and asks to calculate cost of goods sold and ending inventory under FIFO, LIFO and average costing assuming a periodic system. Exercise 4 is the same as 3 but assumes a perpetual system. Exercise 5 provides additional inventory and purchase data and asks to calculate cost of goods sold and ending inventory under FIFO and LIFO, and to identify which method produces a higher ending inventory and cost of goods sold.

Uploaded by

Yally
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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University of South East Asia

2014-2015

Exercise Chapter 5: Inventory


Exercise 1
Winston Corporation has hired you to estimate its inventory on March 31 by the gross profit
method for interim reporting purposes. The gross profit rate has been 35 percent. The following
data are provided:
Inventory- March 1
$40,000
Sales
250,000
Purchases
150,000

Exercise 2
On January 1, 2009. The merchandise inventory of Manuel Company was $300,000. During
2009 Manuel Co. purchased $1,900,000 of merchandise and recorded sales of $2,000,000. The
gross profit on these sales was 20 percent. What is the merchandise inventory of Manuel Co.ltd
at December 31, 2009?

Exercise 3
The Hanuman Company has the following inventory, Purchase and sale data for the month of
October .
Inventory
Purchases

October 1

200 Units

$10

$2,000

October 5
October 17
October 25

500 Units
400 Units
300 Units

$12
$11
$ 8

$6,000
$4,400
$2,400

October 11
October 20

500 Units
400 Units

Sales

Hanuman Company uses a periodic inventory system. The physical inventory count on
October 31 shows 500 Units on hand.

Lecturer: Hour Ry

16

Exercise Financial Accounting

University of South East Asia

2014-2015

Instructions
Determine the cost of goods sold for October and the cost of inventory on hand at
October 31 under
A-First-in, First-out ( FIFO )
B-Last-in, First-out (LIFO )
C-Average cost method.

Exercise 4
Using information in exercise 3 Suppose Hanuman Company uses Perpetual System.

Instructions
Determine the cost of goods sold for October and the cost of inventory on hand at
October 31 under
A-First-in, First-out ( FIFO )
B-Last-in, First-out (LIFO )
C-Average cost method.

Exercise 5
In November, Dara company reports the following for the month of November

November 1
12
23
30

Inventory
Purchases
Purchases
Inventory

Units
200
300
500
200

Units cost
$5
6
7
?

Total Cost
$1,000
1,800
3,500
?

Instructions
A-Compute the cost of goods sold and the cost of the ending inventory under
(1)-FIFO and (2)- LIFO
B-Which costing method that the higher ending inventory ? Why ?
C-Which method results in the higher cost of goods sold ? Why ?

Lecturer: Hour Ry

17

Exercise Financial Accounting

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