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S7-1 Finding Financial Information [LO 7-2, LO 7-4, LO 7-5]
Refer to the financial statements of The Home Depot inAppendix A.1.
How much inventory does the company hold on February 2, 2014? Does this represent an increase or decrease in comparison to the prior year?
$11,057, which is an increase$11,057, which is a decrease$10,710, which is an increase$10,710, which is a decrease2.
What method(s) does the company use to determine the cost of its inventory? Describe where you found this information.
LIFO; Note 1Specific Identification; Management’s Discussion and AnalysisFIFO; Note 1Weighted average cost; the Balance Sheet3.
Compute to one decimal place the company’s inventory turnover ratio and days to sell for the year ended February 2, 2014.
7.1 and 51.44.7 and 77.77.2 and 50.74.8 and 76.0
PA7-1 Analyzing the Effects of Four Alternative Inventory Methods in a Periodic Inventory System [LO 7-3]
Gladstone Company tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31.
TransactionsUnitsUnit CostBeginning inventory, January 11,800$50Transactions during the year:a.Purchase, January 302,50062b.Sale, March 14 ($100 each)(1,450)c.Purchase, May 11,20080d.Sale, August 31 ($100 each)(1,900)
Assuming that for Specific identification method (item 1d)the March 14 sale was selected two-fifths from the beginning inventory and three-fifths from the purchase of January 30. Assume that the sale of August 31 was selected from the remainder of the beginning inventory, with the balance from the purchase of May 1.
Compute the amount of goods available for sale, ending inventory, and cost of goods sold at December 31 under each of the following inventory costing methods:
2-a.Of the four methods, which will result in the highest gross profit?Last-in, first-outWeighted average costFirst-in, first-outSpecific identification2-b.Of the four methods, which will result in the lowest income taxes?Last-in, first-outWeighted average costFirst-in, first-out
E7-4 Calculating Cost of Ending Inventory and Cost of Goods Sold under Periodic FIFO, LIFO, and Weighted Average Cost [LO 7-3]
Spotter Corporation reported the following for June in its periodic inventory records.DateDescriptionUnitsUnit CostTotal CostJune1Beginning12$8$9611Purchase38934224Purchase201122030Ending24Required:1.
Calculate the cost of ending inventory and the cost of goods sold under the (a) FIFO, (b) LIFO, and (c) weighted average cost methods.(Do not round your intermediate calculations. Round “Weighted Average Cost” to 2 decimal places.)
2.Which of the three methods will lead to reporting the highest net income?FIFOLIFOWeighted Average
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