CHAPTER 8 ON INVENTORIES

Kiner Co. has the following data related to an item of inventory:

Inventory, March 1 100 units @ $4.20
Purchase, March 7 350 units @ $4.40
Purchase, March 16 70 units @ $4.50
Inventory, March 31 130 units

1. The value assigned to ending inventory if Kiner uses LIFO is

a. $579.
b. $552.
c. $546.
d. $585.

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1. b (100 × $4.20) + (30 × $4.40) = $552.

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2. The value assigned to cost of goods sold if Kiner uses FIFO is

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a. $579.
b. $552.
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c. $1,723.
d. $1,696.
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2. d 100 + 350 + 70 – 130 = 390 units

(100 × $4.20) + (290 × $4.40) = $1,696.
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Use the following information for questions 3 through 6.

Transactions for the month of June were:
Purchases Sales
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June 1 (balance) 800 @ $3.20 June 2 600 @ $5.50

3 2,200 @ 3.10 6 1,600 @ 5.50
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7 1,200 @ 3.30 9 1,000 @ 5.50

15 1,800 @ 3.40 10 400 @ 6.00
22 500 @ 3.50 18 1,400 @ 6.00
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25 200 @ 6.00

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 3. Assuming that perpetual inventory records are kept in units only, the ending
inventory on a LIFO basis is
a. $4,110.
b. $4,160.
c. $4,290.
d. $4,470.

3. a Available (purchases) = 6,500 units

Sales = 5,200 units
EI = 6,500 – 5,200 = 1,300 units
(800 × $3.20) + (500 × $3.10) = $4,110.

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4. Assuming that perpetual inventory records are kept in dollars, the ending

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inventory on a LIFO basis is

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a. $4,110.

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b. $4,160.
c. $4,290.
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d. $4,470.
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4. c (200 × $3.2) + (400 × $3.1) + (400 × $3.4) + (300 × $3.5) = $4,290.

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Date Purchase Sold Balance

6/1 (800 @ 3.2) 2,560 (800 @ 3.2) 2,560
6/2 (600 @ 3.2) 1,920 (200 @ 3.2) 640
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6/3 (2,200 @ 3.1) 6,820 (200 @ 3.2)

(2,200 @ 3.1) 7,460
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6/6 (1,600 @ 3.1) 4,960 (200 @ 3.2)

(600 @ 3.1) 2,500
6/7 (1,200 @ 3.3) 3,960 (200 @ 3.2)
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(600 @ 3.1) 6,460

(1,200 @ 3.3)
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6/9 (1,000 @ 3.3) 3,300 (200 @ 3.2)

(600 @ 3.1) 3,160
(200 @ 3.3)
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6/10 (200 @ 3.3) (200 @ 3.2)

(200 @ 3.1) 1,280 (400 @ 3.1) 1,880
6/15 (1,800 @ 3.4) 6,120 (200 @ 3.2)
(400 @ 3.1) 8,000
(1,800 @ 3.4)
6/18 (1,400 @ 3.4) 4,760 (200 @ 3.2)

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 (400 @ 3.1) 3,240
(400 @ 3.4)
6/22 (500 @ 3.5) 1,750 (500 @ 3.5) 4,990
6/25 (200 @ 3.5) 700 (200 @ 3.2)
(400 @ 3.1)
(400 @ 3.4) 4,290
(300 @ 3.5)

5. Assuming that perpetual inventory records are kept in dollars, the ending
inventory on a FIFO basis is
a. $4,110.
b. $4,160.
c. $4,290.
d. $4,470.

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5. d (500 × $3.5) + (800 × $3.4) = $4,470.

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Assuming that perpetual inventory records are kept in units only, the ending
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inventory on an average-cost basis, rounded to the nearest dollar, is
a. $4,096.
b. $4,238.
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c. $4,290.
d. $4,322.
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6. b $21,210 ÷ 6,500 units = $3.26

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$3.26 × 1,300 = $4,238.

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7. Johnson Company had 500 units of “Tank” in its inventory at a cost of $4 each. It
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purchased, for $2,800, 300 more units of “Tank”. Johnson then sold 400 units at a
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selling price of $10 each, resulting in a gross profit of $1,600. The cost flow
assumption used by Johnson
a. is FIFO.
b. is LIFO.
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c. is weighted average.
d. cannot be determined from the information given.

7. c (400 × $10) – $1,600 = $2,400 COGS

[(500 × $4) + $2,800] – $2,400 = $2,400 E.I.

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 ($4,800 ÷ 800) × 400 units = $2,400 E.I. under weighted avg.

8. Kingman Company had 500 units of “Dink” in its inventory at a cost of $5 each.
It purchased, for $2,400, 300 more units of “Dink”. Kingman then sold 600 units
at a selling price of $10 each, resulting in a gross profit of $2,100. The cost flow
assumption used by Kingman
a. is FIFO.
b. is LIFO.
c. is weighted average.
d. cannot be determined from the information given.

8. b (600 $10) – $2,100 = $3,900 COGS

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[(500 $5) + $2,400] – $3,900 = $1,000 E.I.

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200 × $5 = $1,000 E.I. under LIFO.

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