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P6-33A P6-34A P6-35A P6-43B

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P6-33A Accounting for inventory using the perpetual system—FIFO, LIFO, and
average cost, and comparing FIFO, LIFO, and average cost [20–25 min]

Decorative Steel began August with 55 units of iron inventory that cost $35 each.
During August, the company completed the following inventory transactions:

so on ...

P6-34A Applying the lower-of-cost-or-market rule to inventories [5 min]

Richmond Sporting Goods, which uses the FIFO method, has the following account
balances at August 31, 2012, prior to releasing the financial statements for the year:

so on ..

P6-35A Correcting inventory errors over a three-year period [15–20 min]

Evergreen Carpets’ books show the following data. In early 2013, auditors found
that the ending inventory for 2010 was understated by $6,000 and that the ending
inventory for 2012 was overstated by $7,000. The ending inventory at December 31,
2011, was correct.
so on ....

1. Prepare corrected income statements for the three years.
2. State whether each year’s net income—before your corrections—is understated
or overstated and indicate the amount of the understatement or overstatement.

P6-43B Estimating ending inventory by the gross profit method and preparing the
income statement [25–30 min]

Kids Costumes estimates its inventory by the gross profit method. The gross profit has
averaged 39% of net sales. The company’s inventory records reveal the following data:

so on ...

1. Estimate the July 31 inventory using the gross profit method.
2. Prepare the July income statement through gross profit for Kids Costumes.

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