Your Uncle Ben, who owns a small bookstore, asks you about calculating inventory quantities. He is thinking
Fantastic news! We've Found the answer you've been seeking!
Question:
a. Calculate Uncle Ben's inventory costs using the first in, first out (FIFO) method.
c. Calculate Uncle Ben's inventory costs using the weighted average method.
2. A couple months later, a pipe bursts in Uncle Ben's bookstore. The water damage ruins most of his inventory. Since your last inventory count in June, Uncle Ben bought $4,875 in new inventory. Sales were $4,194.59. His gross profit during this time was 35 percent.
Calculate Uncle Ben's inventory lost using the gross profit method, using you inventory costs from the weighted average method.
3. After recovering from the pipe burst incident, Uncle Ben is considering looking for an outside investor. He wants to grow the bookstore and sees how well it is doing, even with the setback. He tells you he now spends $3.50 for paperbacks. He has 2,630 of them in stock. He has 879 paperbacks left from before the pipe burst that he bought at $3.25 apiece. He sold 1,203 in the past fifteen days.
Indicate the method that Uncle Ben should use to calculate inventory lost that would be most attractive to investors. Then calculate inventory lost using that method.
Related Book For
Understanding Financial Accounting
ISBN: 978-1118849385
1st Canadian Edition
Authors: Christopher Burnley, Robert Hoskin, Maureen Fizzell, Donald
Posted Date: