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# 6 - SOLUTIONS TO EXERCISES SERIES A CHAPTER 6 EXERCISE 6-1A...

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SOLUTIONS TO EXERCISES - SERIES A - CHAPTER 6 EXERCISE 6-1A a. FIFO b. LIFO c. FIFO d. LIFO e. Weighted Average 6 - 8

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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

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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

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*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. 6 - 14

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EXERCISE 6-5A                    Bristol Sales Summary of Purchase Transactions 1/20 Purchased Units 75 @ \$17 = \$  1,275 4/21 Purchased Units 450 @ 19 = 8,550 7/25 Purchased Units 200 @ 23 = 4,600 9/19 Purchased Units 100 @ 29 = 2,900 Available for Sale 825 \$17,325 a. (1) FIFO Units Cost  per Unit Ending Inventory From 9/19 Purchase 50  @ \$29 = \$1,450 Total Ending Inventory 50 \$1,450 a. (2) LIFO Units Cost  per Unit Ending Inventory From 1/20 Purchase 50  @ \$17 = \$850
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