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Week 6 Checkpoint-Computing Inventory Balances and Lower of Cost or Market

# Week 6 Checkpoint-Computing Inventory Balances and Lower of Cost or Market

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QUICK STUDY QS 6-1 Assigning costs to inventory— perpetual systems P1 Tevin Trader starts a merchandising business on December 1 and enters into three inventory purchases: December 7 10 units @ \$ 6 cost December 14 20 units @ \$12 cost December 21 15 units @ \$14 cost Trader sells 15 units for \$25 each on December 15. Eight of the sold units are from the December 7 purchase and seven are from the December 14 purchase. Trader uses a perpetual inventory system. Determine the costs assigned to the December 31 ending inventory when costs are assigned based on ( a ) FIFO, ( b ) LIFO, ( c ) weighted average, and ( d ) specific identification. (a) FIFO Date Goods Purchased Cost of Goods Sold Inventory Balance Dec. 7 10 @ \$6=\$60.00 10 @ \$6=\$60 Dec. 14 20 @ \$12=\$240 10 @ \$6=\$60 20 @ \$12=\$240 =\$300 Dec. 15 10 @ \$6=\$60 5 @ \$12=\$60=\$120 15 @ \$12 = \$180 Dec. 21 15 @ \$14=210 15 @ \$12 = \$180 15 @ \$14 = \$210 =\$390 Dec. 31 \$120 \$390 (b) LIFO Date Goods Purchased Cost of Goods Sold Inventory Balance Dec. 7 10 @ \$6=\$60.00 10 @ \$6=\$60 Dec. 14 20 @ \$12=\$240 10 @ \$6=\$60 20 @ \$12=\$240 =\$300 Dec. 15 15 @ \$12=\$180 10 @ \$6=\$60 5 @ \$12=\$\$60 =\$120 Dec. 21 15 @ \$14=\$210 10 @ \$6=\$60 5 @ \$12=\$\$60 15 @ \$14=\$210=\$330 Dec. 31 \$180 \$330

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( c ) Weighted Average Date Goods Purchased Cost of Goods Sold Inventory Balance Dec. 7 10 @ \$6=\$60.00 10 @ \$6=\$60 Dec. 14 20 @ \$12=\$240 10 @ \$6=\$60 20 @ \$12=\$240 =\$300 or \$10 per unit Dec. 15 15 @ \$10=\$150 15 @ \$10=\$150
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Week 6 Checkpoint-Computing Inventory Balances and Lower of Cost or Market

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