Inventory

The following information applied to Fenn, Inc. for year 2:
Merchandise purchased for resale $400,000
Freight-in 10,000
Freight-out 5,000
Purchase returns 2,000
Fenn’s year 2 inventoriable cost was

On December 28, year 2, Kerr Manufacturing Co. purchased goods costing $50,000. The terms were FOB destination. Some of the costs incurred in connection with the sale
and delivery of the goods were as follows:
Packaging for shipment $1,000
Shipping 1,500
Special handling charges 2,000
These goods were received on December 31, year 2. In Kerr’s
December 31, year 2 balance sheet, what amount of cost for
these goods should be included in inventory?

On June 1, year 2, Pitt Corp. sold merchandise with a list
price of $5,000 to Burr on account. Pitt allowed trade discounts
of 30% and 20%. Credit terms were 2/15, n/40 and the sale
was made FOB shipping point. Pitt prepaid $200 of delivery
costs for Burr as an accommodation. On June 12, year 2, Pitt
received from Burr a remittance in full payment amounting to

The following information was taken from Cody Co.’s accounting records for the year ended December 31, year 2:
Decrease in raw materials inventory $ 15,000
Increase in fnished goods inventory 35,000
Raw material purchased 430,000
Direct labor payroll 200,000
Factory overhead 300,000
Freight-out 45,000
There was no work in process inventory at the beginning or
end of the year. Cody’s year 2 cost of goods sold is

The following information pertains to Deal Corp.’s year 2
cost of goods sold:
Inventory, 12/31/Y1 $90,000
Year 2 purchases 124,000
Year 2 write-off of obsolete inventory 34,000
Inventory, 12/31/Y2 30,000
The inventory written off became obsolete due to an unexpected and unusual technological advance by a competitor. In
its year 2 income statement, what amount should Deal report
as cost of goods sold?

How should the following costs affect a retailer’s inventory?
Freight-in
Interest on inventory loan

According to the net method, which of the following items
should be included in the cost of inventory?
Freight costs
Purchase discounts not taken

The following information pertained to Azur Co. for the year:
Purchases $102,800
Purchase discounts 10,280
Freight in 15,420
Freight out 5,140
Beginning inventory 30,840
Ending inventory 20,560
What amount should Azur report as cost of goods sold for the year?

When allocating costs to inventory produced for the period,
fxed overhead should be based upon

Per the Codifcation, what is considered the normal
capacity of production facilities?

How should unallocated fxed overhead costs be treated?

When manufacturing inventory, what is the accounting
treatment for abnormal freight-in costs?

On December 15, year 2, Flanagan purchased goods
costing $100,000. The terms were FOB shipping point. Costs
incurred by Flanagan in connection with the purchase and
delivery of the goods were as follows:

Normal freight charges $3,000
Handling costs 2,000
Insurance on shipment 500
Abnormal freight charges for express
shipping
1,200

The goods were received on December 17, year 2. What is
the amount that Flanagan should charge to inventory and
to current period expense?

Bach Co. adopted the dollar-value LIFO inventory
method as of January 1, year 2. A single inventory pool and an
internally computed price index are used to compute Bach’s
LIFO inventory layers. Information about Bach’s dollar value
inventory follows:

Inventory
Date
At base
year cost
At dollar
value LIFO
1/1/Y1 $90,000 $90,000
Year 1 layer 20,000 30,000
Year 2 layer 40,000 80,000

What was the price index used to compute Bach’s year 2 dollar
value LIFO inventory layer?

Nest Co. recorded the following inventory information
during the month of January:
Units
Unit
cost
Total
cost
Units
on
hand
Balance on 1/1 2,000 $1 $2,000 2,000
Purchased on 1/8 1,200 3 3,600 3,200
Sold on 1/23 1,800 1,400
Purchased on 1/28 800 5 4,000 2,200

Nest uses the LIFO method to cost inventory. What amount
should Nest report as inventory on January 31 under each of
the following methods of recording inventory?
Perpetual Periodic

The weighted-average for the year inventory cost flow
method is applicable to which of the following inventory
systems?
Periodic Perpetual

During January year 2, Metro Co., which maintains a perpetual inventory system, recorded the following information
pertaining to its inventory:

Units
Unit
cost
Total
cost
Units on
hand
Balance on 1/1/Y2 1,000 $1 $1,000 1,000
Purchased on
1/7/Y2 600 3 1,800 1,600
Sold on 1/20/Y2 900 700
Purchased on
1/25/Y2 400 5 2,000 1,100

Under the moving-average method, what amount should Metro
report as inventory at January 31, year 2?

Based on a physical inventory taken on December 31,
year 2, Chewy Co. determined its chocolate inventory on a
FIFO basis at $26,000 with a replacement cost of $20,000.
Chewy estimated that, after further processing costs of
$12,000, the chocolate could be sold as fnished candy bars
for $40,000. Chewy’s normal proft margin is 10% of sales.
Under the lower of cost or market rule, what amount should
Chewy report as chocolate inventory in its December 31, year
2 balance sheet?