CHAPTER 6 – INVENTORIES

PRACTICE EXERCISES SET A

Exercise 6.1A

The cost of goods sold of Mario Players are reported as follows.

2019 2020

Beginning inventory $ 20,000 $ 30,000

Cost of goods purchased 150,000 175,000

Cost of goods available for sale 170,000 205,000

Ending inventory 30,000 35,000

Cost of goods sold $140,000 $170,000

Mario made two errors: (1) 2019 ending inventory was overstated $3,000, and (2) 2020 ending inventory was
understated $5,000.

Instructions

Compute the correct cost of goods sold for each year

Exercise 6.2A

Pacific Company reports the following current year purchases and sales for its only product

Date Activities Units Acquired and Sold

Jan 1 Beginning inventory 150 units @ $10
Jan 10 Sales 90 units @ $30
Mar 14 Purchase 400 untis @ $15
Mar 15 Sales 350 units @ $45
Jul 30 Purchase 450 units @ $18
Oct 5 Sales 460 units @ $55
Oct 26 Purchase 250 units @ $20

Assume that Pacific uses periodic inventory system.

Requirements:

1. Compute cost of goods available for sale and the number of units available for sale
2. Compute the number of units in ending inventory
3. Compute the cost assigned to ending inventory using:
a. FIFO
b. LIFO
c. Weighted Average
 d. Specific Identification. (Assume that units sold consist of 150 units from beginning inventory, 240 units
from Mar 14 purchase, 290 units from Jul 30 purchase, and 220 units from Oct 26 purchase)

Note: Round all amount to 2 decimal places

4. Compute the gross profit for each method.