Parker Company uses a perpetual inventory system. It entered into the following calendar-year 2005
purchases and sales transactions:
PROBLEM SET A
Alternative cost flows—perpetual
Date Activities Units Acquired at Cost Units Sold at Retail Units Sold at Retail
1-Jan BEGINNING INVENTORY 600 @ $44.00 $26,400.00
10-Feb PURCHASE 200 @ $40.00 $8,000.00
13-Mar PURCHASE 100 @ $20.00 $2,000.00
15-Mar SALES 400 @ $75.00 $30,000.00
21-Aug PURCHASE 160 @ $60.00 $9,600.00
5-Sep PURCHASE 280 @ $48.00 $13,440.00
910 SALES 200 @ $75.00 $15,000.00
TOTAL 1340 $59,440.00 600 $45,000.00
1. Compute cost of goods available for sale and the number of units available for sale.
2. Compute the number of units in ending inventory.
3. Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) specific identification
(Note: The units sold consist of 500 units from beginning inventory and 100 units from the
March 13 purchase), and (d) weighted average.
4. Compute the gross profit earned by the company for each of the four costing methods in part 3.
5. If the company’s manager earns a bonus based on a percent of gross profit, which method of inventory
costing will the manager likely prefer?
Check (3) Ending inventory: FIFO,
$33,040; LIFO, $35,440;WA, $34,055;
(4) LIFO gross profit, $21,000
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