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Quizz 2 (solution included).docx

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Kevin Petit- Frere

ADM 1340 T Quiz No. 2 (Winter 2014) NAME: _________________________ STUDENT #: ____________________ Instructions: 1. This quiz is 30 minutes in length. 2. This is a close-book, close-notes exam. 3. Acalculator is allowed. 4. Please write or print neatly. Statement of Academic Integrity The School of Management does not condone academic fraud, an act by a student that may result in a false academic evaluation of that student or of another student. Without limiting the generality of this definition, academic fraud occurs when a student commits any of the following offences: plagiarism or cheating of any kind, use of books, notes, mathematical tables, dictionaries or other study aid unless an explicit written note to the contrary appears on the exam, to have in his/her possession cameras, radios (radios with head sets), tape recorders, pagers, cell phones, or any other communication device which has not been previously authorized in writing. Statement to be signed by the student: I have read the text on academic integrity and I pledge not to have committed or attempted to commit academic fraud in this examination. Signed: ______________________________________ Note: an examination copy or booklet without that signed statement will not be graded and will receive a final exam grade of zero. Question 1 (10 points) Here are the inventory records of King Cie for the month of January: Date Description Units Costs 1-Jan Beginning inventory 50 $2 5-Jan Purchase 40 $3 15-Jan Purchase 20 $5 24-Jan Sales 6 Additional information: 1) The 6 units sold on January 24th generated sales of $48. Required: 1) The company has the choice between the FIFO andAverage methods to cost its inventory. Under which of the inventory costing methods would the company report higher retained earning? Provide a brief explanation. (5 points) 2) Under which one of the methods (FIFO andAverage) would the ending inventory balance be the lowest? Provide a brief explanation. (5 points) Solution 1) Since we are in a scenario where prices are increasing, the inventory costing method that would produce the highest retained earnings would be the FIFO method since it uses the oldest inventory first to calculate cost of goods sold which means profits would b
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