Exercise 1 E.8.26. The following information relates to the Jimmy Johnson Company : Date Ending inventory Price/Index Dec 31,

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Exercise 1 E.8.26. The following information relates to the Jimmy Johnson Company : Date Ending inventory Price/Index Dec 31, 2000 $ 70,000 100 Dec 31, 2001 $ 90,300 105 Dec 31, 2002 $ 95,120 116 Dec 31, 2003 $ 105,600 120 Dec 31, 2004 $ 100,000 125 Instructions : Use the dollar value LIFO method to compute the ending inventory for Johnson Co 2000 through 2004.

Answer of Exercise 1 Date Current Price Index Base-Year $ Change from Prior Year Dec. 31, 2000 $ 70,000 1.00 $ 70,000 — Dec. 31, 2001 $ 90,300 1.05 $ 86,000 $ + 16,000 Dec. 31, 2002 $ 95,120 1.16 $ 82,000 $ (4,000) Dec. 31, 2003 $ 105,600 1.20 $ 88,000 $ + 6,000 Dec. 31, 2004 $ 100,000 1.25 $ 80,000 $ (8,000) Ending Inventory—Dollar-value LIFO: Dec. 31, 2000 $ 70,000 Dec. 31, 2001 $ 70,000 @ 1.00 = $ 70,000 $ 16,000 @ 1.05 = $ 16,800 $ 86,800 Dec. 31, 2002 $ 70,000 @ 1.00 = $ 70,000 $ 12,000 @ 1.05 = $ 12,600 $ 82,600 Dec. 31, 2003 $ 70,000 @ 1.00 = $ 70,000 $ 12,000 @ 1.05 = $ 12,600 $ 6,000 @ 1.20 = $ 7,200 $ 89,800 Dec. 31, 2004 $ 70,000 @ 1.00 = $ 70,000 $ 10,000 @ 1.05 = $ 10,500 $ 80,500

Exercise 2 P.8.6. Iowa Co is a multi product firm. Presented below is information concerning one of its products, the Hawkeye. Date Transaction Quantity Price/Cost Jan 1 Beginning inventory 1,000 $ 12 Feb 4 Purchase 2,000 $ 18 Feb 20 Sale 2,500 $ 30 April 2 Purchase 3,000 $ 23 Nov 4 Sale 2,000 $ 33 Instructions : Compute Cost of Goods Sold, assuming Iowa uses : Periodic system, FIFO cost flow Perpetual system, FIFO cost flow Periodic system, LIFO cost flow Perpetual system, LIFO cost flow Periodic system, weighted average cost flow Perpetual system, moving average cost flow

Answer of Exercise 2 (a) Beginning inventory 1,000 Purchases (2,000 + 3,000) 5,000 Units available for sale 6,000 Sales (2,500 + 2,000) 4,500 Goods on hand 1,500 Periodic FIFO 1,000 X $ 12 = $ 12,000 2,000 X $ 18 = $ 36,000 1,500 X $ 23 = $ 34,500 4,500 $ 82,500

Answer of Exercise 2 (c) Periodic LIFO (b) Perpetual FIFO same as periodic :$ 82,500 (c) Periodic LIFO 3,000 X $ 23 = $ 69,000 1,500 X $ 18 = $ 27,000 4,500 $ 96,000

Answer of Exercise 2 (d) Perpetual LIFO Date Purchased Sold Balance Jan 1 1,000 x $ 12 = $ 12,000 Feb 4 2,000 x $ 18 = $ 36,000 (1,000 x $ 12) + (2,000 x $ 18) = $ 48,000 Feb 20 (2,000 x $ 18) + (500 x $ 12) = $ 42,000 500 x $ 12 = $ 6,000 Apr 2 3,000 x $ 23 = $ 69,000 (500 x $ 12) + (3,000 x $ 23) = $ 75,000 Nov 4 2,000 x $ 23 = $ 46,000 (1,000 x $ 23) = $ 29,000 $ 88,000

Answer of Exercise 2 1,000 X $ 12 = $ 12,000 2,000 X $ 18 = $ 36,000 (e) Periodic weighted-average 1,000 X $ 12 = $ 12,000 2,000 X $ 18 = $ 36,000 3,000 X $ 23 = $ 69,000 $ 117,000 $ 117,000 : 6,000 = $ 19.50 4,500 X $ 19.50 = $ 87,750

Answer of Exercise 2 (f) Perpetual moving average Date Purchased Sold Balance Jan 1 1,000 x $ 12 = $ 12,000 Feb 4 2,000 x $ 18 = $ 36,000 3,000 x $ 16 = $ 48,000 Feb 20 2,500 x $ 16 = $40,000 500 x $ 16 = $ 8,000 Apr 2 3,000 x $ 23 = $ 69,000 3,500 x $ 22*= $ 77,000 Nov 4 2,000 x $ 22 = $ 44,000 1,500 x $ 22 = $ 33,000 $ 84,000 */ 500 x $ 16 = $ 8,000 3,000 x $ 23 = $ 69,000 3,500 $ 77,000 $ 77,000 : 3,500 = $ 22