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ACC557 Week 4 E6-1 E6-10 E6-14 P6-3A

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ACC557 Week 4 E6-1 E6-10 E6-14 P6-3A
Financial Accounting 8e

E6-1 Premier Bank and Trust is considering giving Alou Company a loan. Before doing
so, management decides that further discussions with Alou’s accountant may be desirable.
One area of particular concern is the inventory account, which has a year-end balance of
$297,000. Discussions with the accountant reveal the following.

Determine the correct inventory amount on December 31.

E6-10 Fenton Company applied FIFO to its inventory and got the following results for its
ending inventory.

The cost of purchasing units at year-end was cameras $70, DVD players $69, and
iPods $78.

Determine the amount of ending inventory at lower-of-cost-or-market

E6-14 The cost of goods sold computations for Silver Company and Gold Company are
shown below

(a) Compute inventory turnover and days in inventory for each company.
(b) Which company moves its inventory more quickly?

P6-3A Milo Company had a beginning inventory of 400 units of Product Kimbo at a cost
of $8 per unit. During the year, purchases were:

Milo Company uses a periodic inventory system. Sales totaled 1,500 units

a) Determine the cost of goods available for sale.
(b) Calculate the weighted-average unit cost.
(c) Determine (1) the ending inventory, and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost). Prove the accuracy of the
cost of goods sold under the FIFO and LIFO methods.
(d) Which cost flow method results in (1) the lowest inventory amount for the balance sheet, and (2) the lowest cost of goods sold for the income statement?

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