Question

1.

Effie Company uses a periodic inventory system. Details for the inventory account for the month of January, 2013 are as follows:

Units

Per unit price

Total

Balance, 1/1/13	200	$5.00	$1,000
Purchase, 1/15/13	100	5.30	530
Purchase, 1/28/13	100	5.50	550

An end of the month (1/31/13) inventory showed that 140 units were on hand. If the company uses LIFO, what is the value of the ending inventory?

	A.	$742
	B.	$728
	C.	$762
	D.	$700 2. A company just starting business made the following four inventory purchases in June: June 1 150 units $ 390 June 10 200 units 585 June 15 200 units 630 June 28 150 units 510 $2,115 A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand. Using the LIFO inventory method, the value of the ending inventory on June 30 is A. $668. B. $536. C. $1,447. D. $1,564. 3. Romanoff Industries had the following inventory transactions occur during 2013: Units Cost/unit 2/1/13 Purchase 18 $45 3/14/13 Purchase 31 $47 5/1/13 Purchase 22 $49 The company sold 50 units at $70 each and has a tax rate of 30%. Assuming that a periodic inventory system is used, what is the company's after-tax income using FIFO? (rounded to whole dollars) A. $1,184 B. $1,106 C. $774 D. $829

Answer 1

1	Closing Units	140
	LIFO, Last in First Out means closing units will be from Old Purchases
		Units	Rate	Amt
	Opening Inventory	140	5	700
	Answer is D
2	Closing Units	200
	LIFO, Last in First Out means closing units will be from Old Purchases
		Units	Rate	Amt			Value	Qty	Rate PU
	Jun-01	150	2.60	390		Jun-01	390	150	2.60
	Jun-10	50	2.93	146		Jun-10	585	200	2.93
		200		536
	Answer is B
3	Closing Units	200					Qty	Rate PU	Value
						Purc-1	18	45.00	810
	Cost of Goods will be:					Purc-2	31	47.00	1457
		Units	Rate	Amt		Purc-3	22	49.00	1078
	Purc-1	18	45	810			71		3345
	Purc-2	31	47	1457
	Purc-3	1	49	49
		50		2316
	Income Statement:
	Sales	3500	(50*70)
	Less: COGS	2316
	Gross	1184
	Less : Tax 30%	355
	Net Income	829
	Answer is D