6-1A
1. Problem Calculate cost of goods available for sale and units available for sale Beginning inventory ....................................... Feb. 10 ......................................................... Mar. 13 ......................................................... Aug. 21 ......................................................... 600 units @ $44 200 units @ $40 100 units @ $20 160 units @ $60 $26,400 8,000 2,000 9,600 13,440 $59,440
Sept. 5 ......................................................... 280 units @ $48 Units available ................................................1,340 units Cost of goods available for sale
2. Units in ending inventory Units available (from part 1)........................................ 1,340 Less: Units sold (400+200)............................................ 600 Ending Inventory (units) .............................................. 740
3a. FIFO perpetual Date Goods Purchased 1/1 2/10 3/13 200 @ $40 = $ 8,000 100 @ $20 = $ 2,000
Cost of Goods Sold
Inventory Balance 600 @ $44 600 @ $44 200 @ $40 600 @ $44 200 @ $40 100 @ $20 = $26,400 = $34,400 = $36,400
= $18,800
3/15
400 @ $44 = $17,600
200 @ $44 200 @ $40 100 @ $20 200 @ $44 200 @ $40 100 @ $20 $28,400 160 @ $60 200 @ $44 200 @ $40 100 @ $20 160 @ $60 280 @ $48
8/21
160 @ $60 = $ 9,600
=
9/5
280 @ $48 = $13,440
= $41,840
9/10
200 @ $44 = $ 8,800 ______ $26,400
200 @ $40 100 @ $20 160 @ $60 280 @ $48
= $33,040
FIFO Alternate Solution Format Cost of goods available for sale Less: Cost of sales 400 @ $44 200 @ $44 Total cost of goods sold Ending Inventory Proof of Ending Inventory 200 100 160 280 740 @ $40 @ 20 @ 60 @ 48 units
$59,440 $17,600 8,800 26,400 $33,040
Ending Inventory ..............
$ 8,000 2,000 9,600 13,440 $33,040
3b. LIFO perpetual Date 1/1 2/10 3/13 200 @ $40 = $ 8,000 100 @ $20 = $ 2,000 Goods Purchased Cost of Goods Sold Inventory Balance 600 @ $44 600 @ $44 200 @ $40 600 @ $44 200 @ $40 100 @ $20 100 @ $20 200 @ $40 100 @ $44 = $14,400 160 @ $60 = $ 9,600 280 @ $48 = $13,440 500 @ $44 = $26,400 = $34,400 = $36,400 = $22,000
3/15
8/21 9/5
500 @ $44 160 @ $60 500 @ $44 160 @ $60 280 @ $48 200 @ $48 =$ 9,600 ______ $24,000 500 @ $44 160 @ $60 80 @ $48
= $31,600 = $45,040
9/10
= $35,440
LIFO alternate solution format Cost goods of available for sale Less: Cost of sales 100 @ $20 200 @ 40 100 @ 44 200 @ 48 Cost of Goods Sold Ending Inventory Proof of Ending Inventory 500 @ $44 160 @ 60 80 @ 48 740 units
$59,440 $ 2,000 8,000 4,400 9,600 24,000 $35,440
Ending Inventory...
$22,000 9,600 3,840 $35,440
3c. Specific Identification Cost of goods available for sale ........................... Less: Cost of Goods Sold 500 @ $44 ............................................. 100 @ $20 ............................................. Total cost of goods sold........................................ Ending Inventory................................................. Proof of Ending Inventory 100 @ $44 200 @ 40 160 @ 60 280 @ 48 740 units
$59,440 $22,000 2,000 24,000 $35.440
Ending Inventory....
$ 4,400 8,000 9,600 13,440 $35,440
3d. Weighted Average Date 1/1 2/10 200 @ $40 = $ 8,000 Goods Purchased Cost of Goods Sold Inventory Balance 600 @ $44.00 = $26,400
600 @ $44.00 = $34,400 200 @ $40.00 (avg. cost is $43.00) 600 @ $44.00 200 @ $40.00 = $36,400 100 @ $20.00 (avg. cost is $40.44*) 400 @ $40.44 = $16,176 500 @ $40.44 = $20,220
3/13
100 @ $20 = $ 2,000
3/15 8/21 160 @ $60 = $ 9,600
500 @ $40.44 = $29,820 160 @ $60.00 (avg. cost is $45.18) 660 @ $45.18 280 @ $48.00 = $43,259** (avg. cost is $46.02) 200 @ $46.02 = $ 9,204 $25,380 740 @ $46.02 $34,055*** =
9/5
280 @ $48 = $13,440
}
9/10
* rounded to nearest cent ** rounded to nearest dollar *** Total cost of goods sold plus ending inventory = $25,380 + $34,055 = $59,435 (the $5 difference from cost of goods available for sale of $59,440 is due to rounding)
4. Specific Identification $45,000 24,000 $21,000 Weighted Average $45,000 25,380 $19,620
FIFO Sales (600 x $75) .............................. Less: Cost of goods sold .................. Gross profit...................................... $45,000 26,400 $18,600
LIFO $45,000 24,000 $21,000
5. Parker's manager would likely prefer the LIFO method or the Specific Identification method since these methods' gross profit is the largest at $21,000. This would give the manager his/her highest bonus based on gross profit. It is only by coincidence that the LIFO and Specific Identification method have the same cost of goods sold and gross profit. This would not necessarily be the case.