SOLUTIONS TO PROBLEMS PROBLEM 8-1 1. $175,000 – ($175,000 X .20) = $140,000; $140,000 – ($140,000 X .10) = $126,000, cost of goods purchased 2. $1,100,000 + $69,000 = $1,169,000. The $69,000 of goods in transit on which title had passed on December 24 (f.o.b. shipping point) should be added to 12/31/17 inventory. The $29,000 of goods shipped (f.o.b. shipping point) on January 3, 2018, should remain part of the 12/31/17 inventory. tunhiethw 3t.deitaw osicaeasB dntaouecas )ulapteperhnat hreatr(codiiper FIFO inventory cost: 1,000 units at $24 1,000 units at 23 Total $ 24,000 23,000 $ 47,000 LIFO inventory cost: 1,500 units at $21 500 units at 22 Total $ 31,500 11,000 $ 42,500 Average cost: 1,500 at $21 2,000 at 22 3,500 at 23 1,000 at 24 8,000 Totals $180,000 ÷ 8,000 = $22.50 Ending inventory (2,000 X $22.50) is $45,000. 8-36 $ 31,500 44,000 80,500 24,000 $180,000 PROBLEM 8-1 (Continued) 4. Computation of price indexes: 12/31/17 $264,000 = 1.10 (110) $240,000 12/31/18 $286,720 = 1.12 (112) $256,000 Dollar-value LIFO inventory 12/31/17: Increase $240,000 – $200,000 = 12/31/17 price index Increase in terms of 110 Base inventory Dollar-value LIFO inventory $ 40,000 X 1.10 44,000 2017 Layer 200,000 $244,000 Dollar-value LIFO inventory 12/31/18: Increase $256,000 – $240,000 = 12/31/18 price index Increase in terms of 112 2017 layer Base inventory Dollar-value LIFO inventory 5. $ 16,000 X 1.12 17,920 2018 Layer 44,000 200,000 $261,920 The inventoriable costs for 2018 are: Merchandise purchased.................................. Add: Freight-in................................................. Deduct: Purchase returns............................... Purchase discounts.......................... Inventoriable cost............................................. $909,400 22,000 931,400 $16,500 6,800 23,300 $908,100 LO: 2, 3, 4, Bloom: AP, Difficulty: Moderate, Time: 30-40, AACSB: Analysis , AICPA BB: None Measurement, Reporting, AICPA PC:, AICPA BB: None 8-37