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 inventory—100 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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## This note was uploaded on 10/16/2011 for the course BMGT 220 taught by Professor Bulmash during the Spring '08 term at Maryland.

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

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