Quiz 4

 

  1. Cooperstown Sports, Inc. has four products in its inventory. Information about the December 31, 2000, inventory is as follows:

 

Product

Total cost

Replace-ment cost

Net realizable value

Normal Profit

NRV-NP

Market

LCM

Gloves

$360 K

$330 K

$337.5 K

$75K

$262.5K

$330K

330K

Bats

260 K

240 K

360 K

80K

280K

280K

260K

Balls

150 K

110 K

106.25 K

25K

81.25K

106.25K

106.25K

Uniforms

900 K

800 K

900 K

200K

700K

800K

800K

Total

1670 K

 

 

 

 

 

1496.25K

 

  1. Inventory carrying value at December 31, 2000 under LCM rule = $1,496.25
  2. Total loss = $173,750.

 

  1. Infomania Corp. uses the retail inventory method to estimate ending inventory and cost of goods sold. Data for the year 2000 is as follows:

 

 

Cost

Retail

Beginning inventory

$140,000

$280,000

Purchases

420,000

690,000

Freight in

16,000

 

Purchase returns

12,000

18,000

Net markups

 

24,000

Net markdowns

 

26,000

Abnormal spoilage

7,000

10,000

CGAS

557,000

940,000

Cost to retail % = 0.5926

 

 

 

 

 

Normal spoilage

 

5,000

Sales

 

650,000

Sales returns

 

20,000

Employee discounts

 

6,000

Net sales

 

636,000

 

 

 

Ending Inv at retail

 

299,000

Ending Inv at cost

177,187

 

CGS

379,813

 

 

 

 

 

    1. Average cost EI = $177,187 and CGS = $379,813
    2. Conventional (average, LCM) method
      1. Do not include net markdowns in calculating cost to retail percentage,

cost to retail % = 557/966 = 0.5766

EI = $172,403 CGS = $384,597

    1. LIFO method
      1. Keep beginning inventory separate from current year purchases

cost to retail % for beginning inventory = 0.5

cost to retail % for current year purchases = 0.6318

EI = 280,000* 0.5 + 19,000*0.6318 $152,004 CGS = $404,996

4. FIFO method

EI = 299,000*0.6318 $188,908, CGS = $368,092