1. At December 31, YR05 Ford Co. gathered the following facts about its inventor
ID: 2460404 • Letter: 1
Question
1. At December 31, YR05 Ford Co. gathered the following facts about its inventory:
Description
Amount
Inventory on hand in Ford’s ware house
$100
Inventory in-transit to Ford from suppliers, shipped FOB shipping Point
$20
Inventory in-transit to Ford from suppliers, shipped FOB Destination
$10
Inventory in-transit to customers from Ford, shipped FOB Shipping Point
$5
The total amount of inventory to be reported on Ford's December 31, YR05 balance sheet would be:
a. $100 b. $120 c. $130 d. $135 e. none of the above
2. On September 1, YR05, Bose Co. purchased 16 units of inventory from its supplier for $6 each. In the period of October-December, Bose sold 4 of these units for $9 each. At December 31, YR05, Bose had 12 units left and determined that the supplier had reduced the price of these inventory items to $5 each (replacement cost). Bose expects to continue selling the units for $9 each. Given these facts, the year end adjusting entry needed under the lower-of-cost-or-market rule would be:
a. no adjustment is needed since the expected sales price exceeds historical cost. b. debit inventory $12, credit hain on prive appreciation $12 c. debit gain on price appreciation $12, credit inventory $12. d. credit cost of goods sold for $12, debit inventory for $12. e. debit cost of goods sold for $12, credit inventory for $12.
3. When a company uses the FIFO inventory costing method, the unit costs used to compute cost of goods sold and ending inventory are determined by the unit costs of which inventory purchases?
Cost of goods sold
Ending inventory
Most distant (oldest) purchases
Most recent (newest) purchases
Most recent (newest) purchases
Most distant (oldest) purchases
Average of all purchases
Average of all purchases
First (oldest) purchases
First (oldest) purchases
None of the above
4. When a company uses the LIFO inventory costing method, the unit costs used to compute cost of goods sold and ending inventory are determined by the unit costs of which inventory purchases?
Cost of goods sold
Ending inventory
Most distant (oldest) purchases
Most recent (newest) purchases
Most recent (newest) purchases
Most distant (oldest) purchases
Average of all purchases
Average of all purchases
last (oldest) purchases
last (oldest) purchases
None of the above
Description
Amount
Inventory on hand in Ford’s ware house
$100
Inventory in-transit to Ford from suppliers, shipped FOB shipping Point
$20
Inventory in-transit to Ford from suppliers, shipped FOB Destination
$10
Inventory in-transit to customers from Ford, shipped FOB Shipping Point
$5
Explanation / Answer
1) Inventory on hand 100 Add : Inventory in transit - FOB shipping 20 Value of inventory to be reported 120 Option b is correct Inventory in-transit to Ford from suppliers, shipped FOB Destination 10 Not part of inventory as sale complete only when goods reach Ford Co Inventory in-transit to customers from Ford, shipped FOB Shipping Point 5 Not part of inventory as sale is complete once the goods are shipped 2) units price total purchased 16 6 96 sold 4 9 36 Balance inventory 12 5 60 12 6 72 option c is correct ie Debit gain on price appreciation 12 credit inventory 12 3) FIFO inventory system Cost of goods sold First ( oldest) purchase Ending Inventory Most recent ( newest) purchase 4) LIFO inventory system Cost of goods sold Most recent ( newest) purchase Ending Inventory Most distant ( oldest) purchase
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