AC10&11.1.

2 Module 1
ANSWER KEY ON INVENTORIES - ASSESSMENT
1. YEAGER INC.
Direct materials in good condition 1,500,000
Goods in process 650,000
Factory and production supplies 10,000
Finished goods in factory 2,000,000
Finished goods in company-owned retail store (750,000/150%) 535,714
Finished goods in hands of consignees 400,000
Finished goods in transit to customers, at cost 250,000
Finished goods out on approval, at cost 100,000
Materials in transit shipped FOB shipping point 330,000
Packing case tagged “Hold for shipping instructions” 1,000,000
Inventories to be reported on December 31, 2021 6,775,714

2. ACKERMANN INC.

REQUIREMENT 1.
Periodic Perpetual
a. Purchases 800,000 Inventory 800,000
Accounts payable 800,000 Accounts payable 800,000

b. Accounts payable 50,000 Accounts payable 50,000

Purchase returns 50,000 Inventory 50,000

c. Accounts payable 750,000 Accounts payable 750,000

Purchase discount 15,000 Inventory 15,000
Cash 735,000 Cash 735,000

d. Accounts receivable 1,580,000 Accounts receivable 1,580,00

0
Sales 1,580,00 Sales 1,580,000
0

Cost of sales 790,000

Inventory 790,000

e. Sales returns 40,000 Sales returns 40,000

Accounts receivable 40,000 Accounts receivable 40,000

Inventory 20,000
Cost of sales 20,000

f. Cash 1,540,000 Cash 1,540,00

0
Accounts receivable 1,540,00 Accounts receivable 1,580,000
0
 g. Inventory, ending 50,000 Inventory shortage 105,000
Income summary 50,000 Inventory 105,000
{(170 x 1,000)-15,000] x (50 x 1,000]}
REQUIREMENT 2.

Periodic Perpetual
Inventory, beg. 190,000 Cost of goods sold recorded
Purchases 800,000 (790,000 – 20,000) 770,000
Purchase returns (50,000) Inventory shortage 105,000
Purchase discount (15,000) 735,000
Goods available for sale 925,000
Inventory, end. (50,000)
Cost of goods sold 875,000 Cost of goods sold, adjusted 875,000

3. ARLERT COMPANY
REQUIREMENT 1

a. FIFO – periodic Units Unit cost Total Cost

From Oct. 1 inventory 15,000 60 900,000
b. FIFO – perpetual (same answer as Letter A)

c. Weighted average Units Unit cost Total Cost

January 1 20,000 45 900,000

April 1 15,000 50 750,000

October 1 25,000 60 1,500,000

October 31 (10,000) 60 (600,000)
Goods available for sale 50,000 2,550,000

Less: Sales 35,000

Ending inventory 15,000

Weighted average (2,550,000/50,000) 15,000 51 765,000

d. Moving average Units Unit cost Total Cost

January 1 20,000 45 900,000

31 (5,000) 45 (225,000)

Balance 15,000 45 675,000

April 1 15,000 50 750,000

 Balance 30,000 47.50 1,425,000

July 31 (18,000) 47.50 (855,000)

Balance 12,000 47.50 570,000

October 1 25,000 60 1,500,000

Balance 37,000 55.95 2,070,000

October 31 (10,000) 60 (600,000)

Balance 27,000 54.44 1,470,000

Dec. 31 (12,000) 54.44 (653,280)
Balance 15,000 54.44 816,720

REQUIREMENT 2

FIFO (Periodic) Weighted Average (Periodic)

Inventory, beg. 900,000 Inventory, beg. 900,000
Purchases (1.5M + 0.75M – 0.6M) 1,650,000 Purchases 1,650,000
Goods available for sale 2,550,000 Goods available for sale 2,550,000
Inventory, end. ( 900,000) Inventory, end. ( 765,000)
Cost of goods sold 1,650,000 Cost of goods sold 1,785,000

FIFO (Perpetual) Weighted Average (Perpetual)

January 31 Sale (5,000 x 45) 225,000 January 31 Sale 225,000
July 31 Sale: (15,000 x 45) 675,000 July 31 Sale 855,000
(3,000 x 50) 150,000 December 31 Sale 653,280
Dec. 31 Sale: (12,000 x 50) 600,000

Cost of goods sold 1,650,000 Cost of goods sold 1,733,280

4. BRAUN COMPANY (Amounts in millions)

a. FIFO – periodic Units Unit cost Total Cost

From JAW 1,500 100 150,000

From WARHAMMER 14,500 90 1,305,000
Ending inventory 16,000 1,455,000

b. Weighted average Units Unit cost Total Cost

January 1 (beginning) 20,000 80 1,600,000

 Purchases: ARMOR 2,000 100 200,000
CART 8,000 110 880,000
BEAST 6,000 120 720,000

JAW 9,500 100 950,000

WARHAMMER 14,500 90 1,305,000

Goods available for sale 60,000 5,655,000

Weighted average (5,655,000/60,000) 16,000 94.25 1,508,000

c. Specific Identification Units Unit cost Total Cost

From BEAST 6,000 120 720,000

From WARHAMMER 10,000 90 900,000
Ending inventory 16,000 1,620,000

5. HOOVER COMPANY

Units Unit Cost NRV Total Cost NRV LCNRV

(a) (b) (c) (a x b) (a x c)
Category 1:
ROYAL 5,000 105 115 525,000 575,000 525,000
MILITARY 20,000 85 80 1,700,000 1,600,000 1,600,000
SUBTOTAL 2,225,000 2,175,000
Category 2:
GARRISON 40,000 40 35 1,600,000 1,400,000 1,400,000
SURVEY 80,000 60 50 4,800,000 4,000,000 4,000,000
SUBTOTAL 6,400,000 5,400,000
GRAND TOTAL 8,625,000 7,575,000 7,525,000

a. The LCNRV is applied to the individual inventory item. 7,525,000

b. The LCNRV is applied to the inventory category.

Total Cost NRV Lower

Category 1 2,225,000 2,175,000 2,175,000
Category 2 6,400,000 5,400,000 5,400,000
TOTAL 7,575,000

c. The LCNRV is applied to the inventory as a whole.

Total Cost Total NRV Lower

 TOTAL 8,625,000 7,575,000 7,575,000

6. KIRSTEIN COMPANY

a. Beginning inventory 9,000,000

Purchases 37,000,000
Freight in 2,000,000
Purchase returns and allowances (3,500,000)
Purchase discounts (1,500,000) 30,000,000
Cost of goods available for sale 43,000,000

b. Sales 45,000,000
Sales returns (3,000,000)
Net sales 42,000,000
Divide by sales ratio 140%
Cost of goods sold 30,000,000

c. Cost of goods available for sale 43,000,000

Cost of goods sold (30,000,000)
Ending inventory 13,000,000
Ending inventory per physical count (4,000,000)
Cost of inventory shortage 9,000,000

7. SPRINGER COMPANY

Cost Retail
Beginning inventory 200,000 700,000
Purchases 3,300,000 4,380,000
Freight in 140,000
Purchase return (25,000) (40,000)
Purchase discount (45,000)
Net markup 60,000
Goods available for sale – conservative 3,570,000 5,100,000
Markdown (340,000)
Goods available for sale – average 3,570,000 4,760,000

Less: Net sales

Sales 4,000,000
Sales return (80,000) 3,920,000
Ending inventory at selling price 840,000

Cost ratios:
a. Conservative (3,570,000/5,100,000) 70.00%
b. Average cost (3,570,000/4,760,000) 75.00%
c. FIFO 3,570,000−200,000 83.00%
4,760,000−700,000
Ending inventory at cost
a. Conservative (840,000 x 70%) 588,000
b. Average (840,000 x 75%) 630,000
c. FIFO (840,000 x 83%) 697,200