Question Details

The cost flow assumption used by Johnson 



1.	Emley Company has been using the average cost method of inventory valuation for 10 years, since it began operations. Its 2010 ending inventory was $40,000, but it would have been $60,000 if FIFO had been used. Thus, if FIFO had been used, Emley's income before income taxes would have been
a.	$20,000 greater over the 10-year period.
b.	$20,000 less over the 10-year period.
c.	$20,000 greater in 2010.
d.	$20,000 less in 2010.

Use the following information for questions 2 and 3.
Transactions for the month of June were:
		Purchases			Sales	
	June  1	(balance)    800 @ $3.20	June  2	600 @ $5.50
	3	2,200 @   3.10	6	1,600 @   5.50
	7	1,200 @   3.30	9	1,000 @   5.50
	15	1,800 @   3.40	10	400 @   6.00
	22	500 @   3.50	18	1,400 @   6.00
			25	200 @   6.00

	2.	Assuming that perpetual inventory records are kept in dollars, the ending inventory on a FIFO basis is
a.	$4,110.
b.	$4,160.
c.	$4,290.
d.	$4,470.

	3.	Assuming that perpetual inventory records are kept in units only, the ending inventory on an average-cost basis, rounded to the nearest dollar, is
a.	$4,096.
b.	$4,238.
c.	$4,290.
d.	$4,322.

	4.	Milford Company had 500 units of “Tank” in its inventory at a cost of $4 each. It purchased, for $2,800, 300 more units of “Tank”. Milford then sold 400 units at a selling price of $10 each, resulting in a gross profit of $1,600. The cost flow assumption used by Johnson 
a.	is FIFO.
b.	is specific identification.
c.	is weighted average.
d.	cannot be determined from the information given.




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