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Determine the effect on cost of goods sold, total assets, and gross margin for 2010 and 20

Determine the effect on cost of goods sold, total assets, and gross margin for 2010 and 2011 if the following inventory errors are not corrected. Indicate your answer with (+) for overstated, (-) for understated, and (0) for no effect.

a.Beginning inventory for 2010 is understated

b.Beginning inventory for 2010 is overstated

c.Ending inventory for 2010 is understated

d.Ending inventory for 2010 is overstated

Effect in 2010 on

Cost of Goods SoldTotal AssetsGross Margin

a.

b.

c.

d.

Effect in 2011 on

Cost of Goods SoldTotal AssetsGross Margin

a.

b.

c.

d.

19) State which of the following inventory methods would best attain the goals of management. Indicate your answer by writing the proper letter in the blank beside each specific goal.

a.FIFO

b.Weighted-averaged.

c.Specific identification

1.________Management wants to report approximate current inventory replacement costs on its year-end balance sheet during a period of rising prices.

2.________Management wants to maximize net income during a period of rising prices.

3.________The company sells yachts, deep-sea fishing boats, and off-shore speed boats.

4.________Management wants to minimize net income during a period of falling prices.

20) State some guidelines a company's management could use to determine the most desirable inventory costing method.

21) Key West Group Ltd.

Inventory Information

For January 2010

Numbers of unitsPrice paid per unit

Purchase January 1st500$50

Purchase January 15th1000$60

Purchase January 25th2000$70

*** There were no units on hand at the beginning of January 2010.  On January 31st, 2010, Key West Group sold 1500 units of inventory at $100 each to customers. 

Calculate cost of goods sold using FIFO.

22) Inventory data for Freezer Burn Corporation for the year ended December 31, 2010, are as follows:

Beginning inventory50 units at $150 each

March 31 purchase50 units at $155 each

1st quarter sales60 units

June 30 purchase55 units at $160 each

2nd quarter sales70 units

September 30 purchase60 units at $170 each

Compute the perpetual ending inventory balance on December 31, 2010, using:

Dec 07 2019 Read more Less More

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