Question

Question Part A and B

A. Cinnamon Buns Co. (CBC) started 2018 with $54,000 of merchandise on hand. During 2018, $291,000 in merchandise was purchased on account with credit terms of 1/10 n/30. All discounts were taken. Purchases were all made f.o.b. shipping point. CBC paid freight charges of $9,500. Merchandise with an invoice amount of $3,200 was returned for credit. Cost of goods sold for the year was $312,000. CBC uses a perpetual inventory system.

Assuming CBC uses the gross method to record purchases, ending inventory would be:

Multiple Choice

• $26,922.

• $36,422.

• $39,300.

• $36,390.

B. Fulbright Corp. uses the periodic inventory system. During its first year of operations, Fulbright made the following purchases (listed in chronological order of acquisition):

• 43 units at $92
• 71 units at $74
• 173 units at $60

Sales for the year totaled 271 units, leaving 16 units on hand at the end of the year.

Ending inventory using the FIFO method is:

Multiple Choice

• $960.

• $1,472.

• $1,092.

• $1,010.

Answer 1

A.Answer: $36,390

Calculations:

Beginning inventory	$54,000
Purchases during 2018	$291,000
Purchase discount ($291,000 x1%)	($2,910)
Freight	$9,500
Purchase returns	($3,200)
Cost of goods sold	($312,000)
Ending Inventory	$36,390

B,.Answer: $960

Calculations:

Total units available for sale [43+71+173]	287
Units sold	-271
Units in ending inventory	16

Cost of ending inventory using FIFO = 16 Units x $60 unit cost of last purchase = $960