Save Question 17 (3 points) A company had the following purchases during the cur

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Save Question 17 (3 points) A company had the following purchases during the current year: January10 unitsat $120 Fdbruary 20 units at $130 May September: 12 units at $150 November 10 units at $160 15 units at $140 On December 31, there were 26 units remaining in ending inventory. These 26 units consisted of 2 from January, 4 from February. 6 from May, 4 from September, and 10 from November. Using the specific identification method, what is the cost of the ending inventory? 1) $3.500 2$3800 3) 53.960 4)$3.280 Save Question 18 (3 points) Generally accepted accounting principles require that the inventory of a company be reported at 1) Market value 2) Historical cost. 3) Lower of cost or market 4) Replacement cost.

Explanation / Answer

Question 17

Cost of ending Inventory using Specific Identification Method

2 units from January      = 2 units * $120 = $240

4 units from February = 4 units * $130 = $520

6 units from May         = 6 units * $140 = $840

4 units from September = 4 units * $150 = $600

10 units from November = 10 units * $160 = $1,600

Total Cost = 240+520+840+600+1,600 = $3,800

Answer 2) $3,800

Question 18

Generally accepted accounting principles require that the inventory of a company be reported at

3) Lower of cost or market value

GAAP requires us to value inventory at Lower of cost or market value because it follows the accounting principle of prudence. Using this rule, unrealised gain are not accounted for in the books of accounts.

Question 19

Closing inventory = 150 + 220 - 140 + 100 -150 = 180 units

The ending inventory of 180 units represents 100 units from the stock purchased on 15th May and 80 units from the stock purchased on 5th May.

Cost of ending inventory = 100units * $13 + 80 units * $12 = $1,300 + $960 = 2,260

Answer 1) $2,260

Question 20

The Sale on 10th May represents sale from units remaining at the beginning of the month.

Cost of Sales on 10th May = 140units*$10 = $1,400

The sale on 24th May represents 10 units from units remaining at the beginning of the month and 140 units from the stock purchased on 5th of May.

Cost of Sales on 24th May = 10 units *$10 + 140 units * $12 = $100 + 1,680 = $1,780

Total Cost of Goods sold = 1,400 + 1,780 = $3,180

Answer 2) $3,180

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