Question

A.

The following lots of a particular commodity were available for sale during the year

Beginning inventory	9 units at $51
First purchase	19 units at $55
Second purchase	23 units at $22
Third purchase	15 units at $58

The firm uses the periodic system, and there are 22 units of the commodity on hand at the end of the year. What is the ending inventory balance at the end of the year rounded to nearest dollar according to the average cost method? Do not round intermediate calculations.

a.$960

b.$1,024

c.$1,174

d.$1,122

B.

If the estimated rate of gross profit is 30%, what is the estimated cost of the inventory on September 30, based on the following data?

Sep. 1	Inventory (at cost)	$84,240
Sep. 1-30	Purchases, net (at cost)	159,000
Sep. 1-30	Sales	120,400

a.$47,700

b.$84,280

c.$36,120

d.$158,960

C.

During times of rising prices, which of the following is not an accurate statement?

a.LIFO will result in a higher cost of goods sold than FIFO.

b.Average costing will yield results that are between those of FIFO and LIFO.

c.FIFO will result in a higher net income than LIFO.

d.LIFO will result in higher income taxes than FIFO.

Answer 1

A
	Units	Unit cost	Total
Beginning inventory	9	51	459
First purchase	19	55	1045
Second purchase	23	22	506
Third purchase	15	58	870
Total	66		2880
Average cost per unit	43.64	=2880/66
Ending inventory balance	960	=22*43.64
Option A $960 is correct

B
Inventory (at cost)	84240
Add: Purchases, net (at cost)	159000
Total cost of goods available	243240
Less: Cost of goods sold	84280	=120400*(1-30%)
Estimated cost of the inventory	158960
Option D $158,960 is correct

C

LIFO will result in higher income taxes than FIFO is not an accurate statement.

LIFO will result in lower income taxes than FIFO as net income will be lower under LIFO.

Option D is correct