Question

Eaton Electronics uses a periodic inventory system. On March 31, Eaton has two plasma TVs on hand at a cost of $3,100 each (serial numbers 11534892 and 11534894). In April, the company purchases four more identical TVs from Toshiba for $2,250 each (serial numbers 11542631 through 11542634). In May, the company purchases five more identical TVs for $3,200 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?

Multiple Choice

• $6,400

• $5,350

• $5,700

• $6,200

Sugar, Inc. sells $829,300 of goods during the year that have a cost of $578,600. Inventory was $31,583 at the beginning of the year and $35,838 at the end of the year.

What is the inventory turnover ratio? (Round your final answer to 1 decimal place.)

Multiple Choice

• 24.6 times

• 18.3 times

• 17.2 times

• 7.4 times

Pacific Company starts the year with a beginning inventory of 3,900 units at $7 per unit. The company purchases 5,900 units at $6 each in February and 2,900 units at $8 each in March. Pacific sells 1,400 units during this quarter. Pacific has a perpetual inventory system and uses the FIFO inventory costing method. What is the cost of goods sold for the quarter?

Multiple Choice

• $8,400

• $11,200

• $10,500

• $9,800

Answer 1

Part - a:

Computation of cost of goods sold by using specific identification method is:

Cost of goods sold = Sales price of TV for the serial number of 11534894 + Sales price of TV for the serial number of 11542631

= $3,100 + $2,250

= $5,350

Hence, the cost of goods sold is $5,350, that is, the 2nd option is correct.

Part - b:

Computation the inventory turnover ratio is:

Inventory turnover ratio = Cost of goods sold / Average value of inventories

= $578,600 / $33,710.5

= 17.2 times

Hence, the inventory ratio is 17.2 times, that is, the 3rd option is correct.

Working note:

Computation the average value of inventories is:

Average value of inventories = (Value of beginning inventory + Value of inventory at the ending) / 2

= ($31,583 + $35,838) / 2

= $67,421 / 2

= $33,710.5

Hence, the average value of inventories is $33,710.5

Part - c:

Computation of cost of goods sold for the quarter by using FIFO method is:

Cost of goods sold for the quarter = Number of units sold * Value of per unit at the beginning

= 1,400 * $7

= $9,800

Hence, the cost of goods sold for the quarter is $9,800, that is, the 4th option is correct.