Accounting Answers

Boss Motorcycle Shop sells motorcycles, ATVs, and other related supplies and accessories. During the taking of its physical inventory on December 31, 2010, Boss Motorcycle
Shop incorrectly counted its inventory as $195,750 instead of the correct amount of
$188,200.
a. State the effect of the error on the December 31, 2010, balance sheet of Boss Motorcycle
Shop.
b. State the effect of the error on the income statement of Boss Motorcycle Shop for
the year ended December 31, 2010.

On the basis of the following data, determine the value of the inventory at the lower
of cost or market. Assemble the data in the form illustrated in Exhibit 8.
Inventory Unit Unit
Commodity Quantity Cost Price Market Price
Aquarius 20 $ 80 $ 92
Capricorn 50 70 65
Leo 8 300 280
Scorpio 30 40 30
Taurus 100 90 94

The units of an item available for sale during the year were as follows:
Jan. 1 Inventory 27 units at $120
Feb. 17 Purchase 54 units at $138
July 21 Purchase 63 units at $156
Nov. 23 Purchase 36 units at $165
There are 50 units of the item in the physical inventory at December 31. The periodic
inventory system is used. Determine the inventory cost by (a) the first-in, first-out
method, (b) the last-in, first-out method, and (c) the average cost method.

The following units of a particular item were available for sale during the year:
Beginning inventory 150 units at $75
Sale 120 units at $125
First purchase 400 units at $78
Sale 200 units at $125
Second purchase 300 units at $80
Sale 290 units at $125
The firm uses the perpetual inventory system, and there are 240 units of the item on
hand at the end of the year. What is the total cost of the ending inventory according
to (a) FIFO, (b) LIFO?