Question

Some Accounting for Inventories questions I have:

1.

CAISCO Sales Inc. had a beginning inventory of May comprising of 700 units that had a cost of $80/unit. A summary of purchases and sales during the month of May are as follows:

Date	Unit Cost	Units Purchased	Units sold
May 2			400
May 6	$83	1,200
May 10			900
May 19	$85	800
May 23			500
May 30	$88	300

If CAISCO Sales Inc. uses a periodic inventory system, which of the following statements is true?

CAISCO Sales Inc. must use the weighted average cost flow assumption since a perpetual inventory system is used.

CAISCO Sales Inc. must use the FIFO cost flow assumption since a periodic inventory system is used.

None of the other alternatives are correct

CAISCO Sales Inc.'s ending inventory will be higher if FIFO is used than if LIFO is used.

CAISCO Sales Inc.'s ending inventory consists of 1,200 units only if FIFO cost flow method IS assumed.

2.

Chime Inc. counted and valued its inventory using the first-in, first-out (FIFO) cost flow assumption at both December 31, 2004 and 2005 and reported these amounts on its financial statements. While there was no consignment inventory on hand at December 31, 2005, there was at December 31, 2004. If consignment inventory (inventory not belonging to Chime, but stored on its premises), had been inadvertently counted and included in the 2004 inventory valuation, the

inventory would have been understated at December 31, 2005

inventory would have been overstated at December 31, 2005

net income would have been understated in 2004

None of the other alternatives are correct

net income would have been understated in 2005

3.

The following information relates to the inventory of ABC Inc. who uses a perpetual inventory system:

Date	Transaction	# Units	Unit cost/sales price
December 4	Opening inventory	300	$15
December 10	Purchase inventory	100	$18
December 15	Sell inventory	320	$27
December 20	Purchase inventory	150	$20
December 29	Sell inventory	100	$30

What is the value of inventory on hand after the December 29 sale if LIFO is used?

$3,900

$2,600

$1,950

$2,200

$2,400

4.

Meanmocha Hardware has a periodic inventory system and uses the weighted average method. The company began the month of November with 150 large brass switch plates on hand at a cost of $4.00 each. These switch plates sell for $7.00 each. The following schedule sets forth the purchases of switch plates during November:

Date of Transaction	Quantity Received	Unit Cost
November 7	200	$4.20
November 11	200	$4.40
November 22	250	$4.80

If Meanmocha sells 570 switch plates for $7.00 each during November. What is the company's gross profit for November (rounded to the nearest dollar)?

$1,482

$1,516

$1,528

$1,046

Some other amount

Answer 1

Req 1.
Answer is CAISCO sales inc ending inventory will be higher if FIFO is used than if LIFO is used.
Q2.
Answer is Net income would have been understated in 2005
As the beginning inventory will be refelcting at the higher value.
Q3. Answer is $2200
STATEMENT SHOWING INVENTORY RECORD UNDER PERPETUAL LIFO METHOD
	RECIEPTS			COST OF GOODS SOLD			BALANCE
DATE	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $
4-Dec							300	15	4500
10-Dec	100	18	1800				300	15	4500
							100	18	1800
15-Dec				100	18	1800
				220	15	3300	80	15	1200
20-Dec	150	20	3000				80	15	1200
							150	20	3000
29-Dec				100	20	2000	80	15	1200
							50	20	1000
TOTAL	250		4800	420		7100	130		2200
Q4. Answer is $1482
Explanation:
Average cost per unit:
		Units	Rate	Total Amount
1-Nov		150	4	600
7-Nov		200	4.2	840
11-Nov		200	4.4	880
22-Nov		250	4.8	1200
TOTAL		800		3520
Average cost (3520/800)=			4.40
Sales (570@$7)			3990
Less: COGS (570 units @4.4)			2508
Gross Margin			1482