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Inventory issues for Gleason, Murphy Supply, Sweet Creations

G) Gleason Corporation's fiscal year ends on December 31. Gleason determines inventory quantity by a physical count of inventory on hand at the close of business on December 31. The company's controller has asked for your help in deciding if the following items should be included in the year-end inventory count.

1. Goods purchased from a vendor shipped f.o.b. shipping point on December 24 that arrived on January 4.
2. Goods shipped f.o.b. shipping point on December 27 that arrived at the customer's location on January 4.
3. Goods purchased from a vendor shipped f.o.b. destination on December 27 that arrived on January 5.
4. Goods sold to a customer sitting on the loading dock on December 31 waiting for the customer to pickup.
5. Freight charges on goods sold in 2.
6. Merchandise held on consignment for Masterwear, Inc.
7. Goods shipped f.o.b. destination on December 29 that arrived at the customer's location on January 2.

Determine if each of the seven items above should be included or excluded from the company's year-end inventory.

Shown below is activity for one of the products of Murphy Supply Company

January 1 balance, 500 units @ $55 $27,500
Purchases:
January 10: 500 units @ $60
January 20: 1,000 units @ $63
Sales:
January 12: 800 units
January 28: 750 units
H) Compute the ending inventory and cost of goods sold assuming Murphy uses FIFO.

Shown below is the activity for one of the products of Sweet Creations:

January 1 balance, 80 units @ $50 $4,000
Purchases:
January 18: 40 units @ $51
January 28: 40 units @ $52
Sales:
January 12: 30 units
January 22: 30 units
January 31: 45 units

I) Compute the ending inventory and cost of goods sold assuming Sweet Creations uses LIFO and perpetual inventory system.

J) Compute the ending inventory and cost of goods sold assuming Sweet Creations uses average cost and a periodic inventory system.

Matthew's Greenhouse has developed the following data for lower-of-cost-or-market valuation for its products:

Selling Price Cost Replacement Cost
Broad Leaf Trees
Ash $1800 $1000 $ 800
Beech 2200 1600 1400
Needle Leaf Trees
Cedar 2500 1750 1800
Fir 3600 3350 3200
Fruit Trees
Apple 1800 1400 1300
Cherry 2300 1800 1700

The normal profit margin on all trees is 20% of selling price and disposal costs are 10% of selling price.

K) Determine the balance sheet inventory carrying value assuming the LCM rule is applied to the total inventory.

L) On July 5, 2009, a fire destroyed the entire inventory of Lindy's Music Shop. The following information is available from its accounting records:

Inventory, January 1, 2009 $211,000
Purchases, Jan 1 - July 5 500,000
Sales, Jan 1 - July 5 900,000
Normal Gross margin 30%

Compute the estimated cost of inventory lost in the fire.

15. Littleton Company uses a periodic inventory system and the LIFO retail method to estimate its ending inventories. The following partial data has been summarized for December 31, 2009:
Cost Retail
Inventory January 1 $216,000 $285,000
Purchases 650,000
Net markups 18,300
Net Markdowns 21,200
Net Sales 625,000
Inventory, Dec. 31 232,730

Determine the cost-to-retail percentage used by Littleton. Assume stable retail prices during the period.

Solution Summary

Inventory issues for Gleason, Murphy Supply and Sweet Creations are examined.

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