Accounting Gods help me please!!?

Question

As of December 31, 2005, Stand Still Industries had $1,000 of raw materials nventory. At the beginning of 2005, there was $800 of materials on hand. During the year, the company purchased $122,000 of materials; however, it paid for only $117,000. How much inventory was requisitioned for use on jobs during 2005?

Answer 1

The question is looking for the cost of goods manufactured (or used as it were) which is simply beginning inventory plus purchases, less ending inventory. Therefore:

800 + 122,000 - 1,000 = 121,800

The 117,000 does not factor in the calculation as it does not matter how much of the purchased material was actually paid for, only what its cost is.

Answer 2

Beginning Inventory ($800)
+ Purchases (lower of cost or market) ($117,000)
- Requisitions (Unknown)
= Ending Inventory ($1000)

Requisitions = $800 + $117,000 - $1,000 = $116,800

Jack