Chapter 8
Inventory Valuation
247
Review Exercise
The following transactions took place at Mike’s Tikes Toys during the month of June 2016.The
company uses a perpetual inventory system.There are 100 items in opening inventory that cost
$12 each.
Jun 3 Purchased 500 items at a cost of $15 each on credit (on account).
Jun 10 Sold 200 items at $45 each on credit.
Jun 12 Purchased 300 items at $18 each on credit.
Jun 20 Sold 300 items at $50 each for cash.
Required
a) Using the FIFO method, prepare the inventory record to demonstrate the closing inventory
balance after the above transactions.
b) Prepare the top portion of the multistep income statement showing sales revenue, cost of
goods sold, and gross profit for the month ended June 30, 2016. Use the information from
part a).
c) Using the weighted-average cost method, prepare the inventory record to demonstrate the
closing inventory balance after the above transactions.
d) Prepare the top portion of the multistep income statement showing sales revenue, cost of
goods sold, and gross profit for the month ended June 30, 2016. Use the information from
part c).
See Appendix I for solutions.
