Question

1.

Eaton Electronics uses a periodic inventory system. On March 31, Eaton has two plasma TVs on hand at a cost of $1,800 each (serial numbers 11534892 and 11534894). In April, the company purchases four more identical TVs from Toshiba for $1,600 each (serial numbers 11542631 through 11542634). In May, the company purchases five more identical TVs for $1,900 each (serial numbers 11550964 through 11550968). In June, Eaton sells two of these TVs (serial numbers 11534894 and 11542631). There were no additional purchases or sales during the remainder of the year.

Eaton Electronics uses the specific identification method. What is its cost of goods sold?

$3,800

$3,533

$3,600

$3,400

2.

Delta Diamonds uses a periodic inventory system. The company had five one-carat diamonds available for sale this year: one was purchased on June 1 for $850, two were purchased on July 9 for $950 each, and two were purchased on September 23 for $1,000 each. On December 24, it sold one of the diamonds that was purchased on July 9. Using the specific identification method, its ending inventory (after the December 24 sale) equals

$950.

$3,900.

$2,750.

$3,800.

3.

Delta Diamonds uses a periodic inventory system. The company had five one-carat diamonds available for sale this year: one was purchased on June 1 for $900, two were purchased on July 9 for $950 each, and two were purchased on September 23 for $1,000 each. On December 24, it sold one of the diamonds that was purchased on July 9. Using the FIFO method, its cost of goods sold for the year ended is:

$900.

$1,000.

$1,900.

$2,000.

4.

A company had been selling its product for $42 per unit, but recently lowered the selling price to $26 per unit. The company's current inventory consists of 255 units purchased at $38 per unit. The market value of this inventory is currently $ $24 per unit. At what amount should the company’s inventory be reported on the balance sheet?

$6,120

$6,630

$10,710

$9,690

5. Which of the following is not associated with a high inventory turnover ratio?

A drop in the demand for the company's products.

A reduction in storage and obsolescence costs.

Relatively short time periods between inventory purchases and sales.

A reduction in borrowing to finance inventory purchases.

Answer 1

1

Eaton Electronics

Answer: cost of goods sold as per specific identification method=$3400

Working notes for the above answer:

cost of goods sold as per specific identification method

=Cost of s erial numbers 11534894 + 11542631

=1800+1600

=3,400

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2

Delta Diamonds

Answer: cost of ending inventory asper specific identification method=$3800

Working notes for the above answer:

	Unit remaing	Cost per unit	Cost of endin inventory
	A	B	C=A*B
1-Jun	1	850	850
9-Jul	2-1=1	950	950
23-Sep	2	1000	2000
Total			3800

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3

Answer:

. Using the FIFO method, its cost of goods sold for the year ended is:900

Explanation

As PER FIFO Cost of goods sold

=Unit x price of first purchase

=1x 900

=$900

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4

Answer:6120

Explanation

It will be reported under lower cost

=24 x255

=$6120