6 - SOLUTIONS TO EXERCISES - SERIES A - CHAPTER 6 EXERCISE...

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Unformatted text preview: SOLUTIONS TO EXERCISES - SERIES A - CHAPTER 6 EXERCISE 6-1A a. FIFO b. LIFO c. FIFO d. LIFO e. Weighted Average 6-8 EXERCISE 6-2A Mix Co. First Purchase $1,200 Second Purchase 1,500 Total $2,700 (a) (b) (c) FIFO LIFO W. AVG. Cost of Goods Sold $1,200 $1,500 $1,350* Ending Inventory 1,500 1,200 1,350* *Average Cost per Unit: $2,700 2 = $1,350 6-9 EXERCISE 6-3A The Laird Company Inventory Purchases Beginning Inventory 200 @ $45 = $ 9,000 First Purchase 300 @ 50 = 15,000 Second Purchase 350 @ 52 = 18,200 Goods Available for Sale 850 $42,200 a. Cost of Goods Sold: FIFO Units Cost per Unit Cost of Goods Sold From Beginning Inventory 200 @ $45 = $ 9,000 From First Purchase 300 @ 50 = 15,000 From Second Purchase 300 @ 52 = 15,600 Total 800 $39,600 Ending Inventory: 50 units @ Second Purchase Cost of $52 = $2,600 b. Cost of Goods Sold: LIFO Units Cost per Unit Cost of Goods Sold From Second Purchase 350 @ $52 = $18,200 From First Purchase 300 @ 50 = 15,000 From Beginning Inventory 150 @ 45 = 6,750 Total 800 $39,950 Ending Inventory: 50 units @ Beginning Inventory cost $45 = $2,250 c. 6-10 Weighted Average: Total Cost Total Units = Cost per Unit $42,200 850 = $49.647 Cost of Goods Sold 800 units @ $49.647 = $39,717.60 Ending Inventory 50 units @ $49.647 = $ 2,482.40* *.05 difference due to rounding 6-11 EXERCISE 6-4A a. (1) Porter Company FIFO Sales (320 @ $30) $9,600 Cost of Goods Sold: From Beginning Inv. 70 units @ $13 = $ 910 From Purchases 250 units @ $18 = 4,500 (5,410) Gross Margin $4,190 a. (2) LIFO Sales (320 @ $30) $9,600 Cost of Goods Sold: From Purchases 280 units @ $18 = $5,040 From Beg. Inv. 40 units @ $13 = 520 (5,560) Gross Margin $4,040 a. (3) Weighted Average Sales (320 @ $30) $9,600 Cost of Goods Sold: Average Cost per Unit 320 @ $17* = $5,440 (5,440) Gross Margin $4,160 6-12 *Total cost $5,950 Total units 350 = $17.00 Cost per unit b. $150 ($4,190 - $4,040). The difference in net income would be the same as the difference in gross margin, assuming there are no income tax considerations. 6-13 EXERCISE 6-4A (cont.) c. FIFO LIFO W. Avg. Cash Flows From Operating Activities: Cash Inflow from Customers $9,600 $9,600 $9,600 Cash Outflow for Inventory (5,040) (5,040) (5,040) Net Cash Flow from Operating Act. $4,560 $4,560 $4,560 Net cash flow from operating activities will be the same for all three methods because the amount of cash from sales and the amount of cash paid for inventory is the same regardless of the method of cost flow assumed. If the company were subject to income tax, the amount of cash paid for tax expense would be different because the amount of taxable income would be different....
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6 - SOLUTIONS TO EXERCISES - SERIES A - CHAPTER 6 EXERCISE...

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