Ch+8+Pr+6 2

# Ch+8+Pr+6 2 - \$159,000 Less Ending inventory(below(65,471...

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Problem 8-6 Requirement 1 Cost of goods available for sale for periodic system: Purchases: 5,000 x \$4.00 \$20,000 12,000 x \$4.50 54,000 17,000 x \$5.00 85,000 Cost of goods available (34,000 units) \$159,000 a. FIFO Cost of goods available for sale (34,000 units) \$159,000 Less: Ending inventory (determined below) (70,000 ) Cost of goods sold \$ 89,000 Cost of ending inventory: Date of purchase Units Unit cost Total cost March 22 14,000 5.00 70,000 b. LIFO Cost of goods available for sale (34,000 units) \$159,000 Less: Ending inventory (determined below) (60,500 ) Cost of goods sold \$ 98,500 Cost of ending inventory: Date of purchase Units Unit cost Total cost Jan. 7 5,000 \$4.00 \$20,000 Feb. 16 9,000 4.50 40,500 Totals 14,000 \$60,500

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Problem 8-6 (concluded) c. Average cost Cost of goods available for sale (34,000 units)
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Unformatted text preview: \$159,000 Less: Ending inventory (below) (65,471 ) Cost of goods sold \$ 93,529 * Cost of ending inventory: \$159,000 Weighted-average unit cost = = \$4.6765 34,000 units 14,000 units x \$4.6765 = \$65,471 * Alternatively, could be determined by multiplying the units sold by the average cost: 20,000 units x \$4.6765 = \$93,530 (rounding) Gross Profit ratio: FIFO: \$51,000* u \$140,000** = 36% LIFO: \$41,500 u \$140,000 = 30% Average: \$46,471 u \$140,000 = 33% *Sales less cost of goods sold **20,000 units x \$7 sales price = sales Requirement 2 In situations when costs are rising, LIFO results in a higher cost of goods sold and, therefore, a lower gross profit ratio than FIFO....
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## This note was uploaded on 11/16/2009 for the course ACCOUNTING 3351 taught by Professor Malkie during the Spring '09 term at ITT Tech Flint.

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Ch+8+Pr+6 2 - \$159,000 Less Ending inventory(below(65,471...

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