Page 322 - Accounting Principles (A Business Perspective)

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Problem C Brett Company sells personal computers and uses the specific identification method to account for
its inventory. On 2010 November 30, the company had 46 Orange III personal computers on hand that were
acquired on the following dates and at these stated costs:

Units Unit cost
July 3 10 @ $10,080
September 10 20 @ $ 9,600
November 29 16 @ $10,700
Brett sold 36 Orange III computers at USD 12,720 each in December. There were no purchases of this model in
December.
a. Compute the gross margin on December sales of Orange III computers assuming the company shipped those
units that would maximize reported gross margin.

b. Repeat part (a) assuming the company shipped those units that would minimize reported gross margin for
December.
c. In view of your answers to parts (a) and (b), what would be your reaction to an assertion that the specific
identification method should not be considered an acceptable method for costing inventory?
Problem D The inventory records of Thimble Company show the following:
March 1 Beginning inventory consists of 10 units costing USD 40 per unit.
3 Sold 5 units at USD 94 per unit.

10 Purchased 16 units at USD 48 per unit.
12 Sold 8 units at USD 96 per unit.
20 Sold 7 units at USD 96 per unit.
25 Purchased 16 units at USD 50 per unit.
31 Sold 8 units at USD 96 per unit.
Assume all purchases and sales are made on credit.
Using FIFO perpetual inventory procedure, prepare the appropriate journal entries for March.
Problem E The following purchases and sales for Ripple Company are for April 2010. There was no inventory
on April 1.

Purchases Sales
Unit
Units Cost Units
April 3 3,200 @ $33.00 April 6 1,500
April 10 1,600 @ 34.00 April 12 1,400
April 22 2,000 @ 35.00 April 25 2,300
April 28 1,800 @ 36.00
a. Compute the ending inventory as of 2010 April 30, using perpetual inventory procedure, under each of the
following methods: (1) FIFO, (2) LIFO, and (3) weighted-average (carry unit cost to four decimal places and round
total cost to nearest dollar).
b. Repeat a using periodic inventory procedure.
Problem F Refer to the data in problem E
a. Using LIFO perpetual inventory procedure, prepare the journal entries for the purchases and sales (Cost of

Goods Sold entry only).
b. Repeat (a) using LIFO periodic inventory procedure, including closing entries. (Note: You may want to refer
to the Appendix in Chapter 6 for this part.)

Accounting Principles: A Business Perspective 323 A Global Text