Page 318 - Accounting Principles (A Business Perspective)

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Exercises
Exercise A Crocker Company reported annual net income as follows:
2008 $484,480
2009 487,680
2010 409,984
Analysis of its inventories revealed the following incorrect inventory amounts and these correct amounts:
Incorrect Inventory Correct inventory
Amount amount
2008 December 31 $ 76,800 $89,600
2009 December 31 86,400 77,600

Compute the annual net income for each of the three years assuming the correct inventories had been used.
Exercise B Slate Truck Company manufactures trucks and identifies each truck with a unique serial plate. On
December 31, a customer ordered 5 trucks from the company, which currently has 20 trucks in its inventory. Ten of
these trucks cost USD 20,000 each, and the other 10 cost USD 25,000 each. If Slate wished to minimize its net
income, which trucks would it ship? By how much could Slate reduce net income by selecting units from one group
versus the other group?
Exercise C Miami Discount Company inventory records show:

Unit Total
Units Cost Cost
Beginning inventory 3,000 $38.00 $114,000
Purchases:
February 14 900 39.00 35,100
March 18 2,400 40.00 96,000
July 21 1,800 40.30 72,540
September 27 1,800 40.60 73,080
November 27 600 41.00 24,600
Sales:
April 15 2,800
August 20 2,000
October 3 1,500
The December 31 inventory was 4,200 units. Miami Discount Company uses perpetual inventory procedure.
Present a schedule showing the measurement of the ending inventory using FIFO perpetual inventory procedure.
Exercise D Using the data in the previous exercise for Miami Discount Company, present a schedule showing
the measurement of the ending inventory using LIFO perpetual inventory procedure.
Exercise E London Company had a beginning inventory of 160 units at USD 24 (total = USD 3,840) and the
following inventory transactions during the year:

January 8, sold 40 units.
January 11, purchased 80 units at USD 30.00.
January 15, purchased 80 units at USD 32.00.
January 22, sold 80 units.
Using the preceding information, price the ending inventory at its weighted-average cost, assuming perpetual
inventory procedure.
Exercise F Kettle Company made the following purchases of Product A in its first year of operations:

Units Unit
Cost
January 2 1,400 @ $7.40
March 31 1,200 @ 7.00
July 5 2,400 @ 7.60
November 1 1,800 @ 8.00

Accounting Principles: A Business Perspective 319 A Global Text