220Ch5-8-Solutions

220Ch5-8-Solutions - Exercise 5-1 (30 minutes) a. Specific...

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Unformatted text preview: Exercise 5-1 (30 minutes) a. Specific identification Ending inventory100 units from January 30, 80 units from January 20, and 45 units from beginning inventory Ending Cost of Computations Inventory Goods Sold (100 x $5.00) + (80 x $6.00) + (45 x $7.00)....... $1,295 $2,800 - $1,295................................................. $1,505 b. Weighted average perpetual Date Goods Purchased Cost of Goods Sold Inventory Balance 1/ 1 140 @ $7.000 = $ 980 1/10 90 @ $ 7.00 = $ 630 50 @ $7.000 = $ 350 1/20 220 @ $6.00 50 @ $7.000 = $1,670 220 @ $6.000 (avg. cost is $6.185) 1/25 145 @ $6.185 = $ 897* 125 @ $6.185 = $ 773* 1/30 100 @ $5.00 _____ 125 @ $6.185 = $1,273 $1,527 100 @ $5.000 (avg. cost is $5.658) * rounded c. FIFO Perpetual Date Goods Purchased Cost of Goods Sold Inventory Balance 1/ 1 140 @ $7.00 = $ 980 1/10 90 @ $7.00 = $ 630 50 @ $7.00 = $ 350 1/20 220 @ $6.00 50 @ $7.00 = $1,670 220 @ $6.00 1/25 50 @ $7.00 95 @ $6.00 = $ 920 125 @ $6.00 = $ 750 1/30 100 @ $5.00 _____ 125 @ $6.00 = $1,250 $1,550 100 @ $5.00 Exercise 5-1 (Continued) d. LIFO Perpetual Date Goods Purchased Cost of Goods Sold Inventory Balance 1/ 1 140 @ $7.00 = $ 980 1/10 90 @ $7.00 = $ 630 50 @ $7.00 = $ 350 1/20 220 @ $6.00 50 @ $7.00 = $1,670 220 @ $6.00 1/25 145 @ $6.00 = $ 870 50 @ $7.00 = $ 800 75 @ $6.00 1/30 100 @ $5.00 _____ 50 @ $7.00 $1,500 75 @ $6.00 = $1,300 100 @ $5.00 Alternate Solution Format for FIFO and LIFO Perpetual Ending Cost of Computations Inventory Goods Sold c. FIFO (125 x $6.00) + (100 x $5.00)............................................. $1,250 (90 x $7.00) + (50 x $7.00) + (95 x $6.00)......................... $1,550 d. LIFO (50 x $7.00) + (75 x $6.00) + (100 x $5.00)....................... $1,300 (90 x $7.00) + (145 x $6.00)............................................... $1.500 Exercise 5-2 (20 minutes) LIBERTY COMPANY Income Statements For Month Ended January 31 Specific Identification Weighted Average FIFO LIFO Sales.............................. $3,525 $3,525 $3,525 $3,525 (235 units x $15 price) Cost of goods sold....... 1,505 1,527 1,550 1,500 Gross profit................... 2,020 1,998 1,975 2,025 Expenses....................... 1,250 1,250 1,250 1,250 Income before taxes..... 770 748 725 775 Income tax expense (30%). 231 224 * 218 * 233 * Net income.................... $ 539 $ 524 $ 507 $ 542 * Rounded to nearest dollar. Exercise 5-2 (Concluded) 1. LIFO method results in the highest net income of $542. 2. Weighted average net income of $524 falls between the FIFO net income of $507 and the LIFO net income of $542. 3. If costs were rising instead of falling, then the FIFO method would yield the highest net income. Exercise 5-3 (30 minutes) a. FIFO Perpetual Date Goods Purchased Cost of Goods Sold Inventory Balance 1/ 1 126 @ $ 8 = $1,008 1/10 113 @ $ 8 = $ 904 13 @ $ 8 = $ 104 3/14 315 @ $13 = $4,095 13 @ $ 8 = $4,199 315 @ $13 3/15 13 @ $ 8 148 @ $13 = $1,924 167 @ $13 = $ 2,275 7/30 250 @ $18 = $4,500 148 @ $13 = $6,424 250 @ $18 10/ 5 148 @ $13...
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220Ch5-8-Solutions - Exercise 5-1 (30 minutes) a. Specific...

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