FINANCIAL ACCOUNTING ACCT 2301 >IC<
FINANCIAL ACCOUNTING ACCT 2301 >IC<
5th Edition
ISBN: 9781259690457
Author: Wild
Publisher: MCGRAW-HILL CUSTOM PUBLISHING
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Chapter 5, Problem 3BP

1.

To determine

Ascertain the cost of goods available for sale, and the number of units available for sales.

1.

Expert Solution
Check Mark

Explanation of Solution

Ascertain the cost of goods available for sale, and the number of units available for sales as follows:

DetailsNumber of UnitsRate per Unit ($)Total Cost ($)
Beginning balance15030045,000
Add: Purchases
May 6350350122,500
May 178045036,000
May 2510045845,800
Total Goods available for Sale680249,300

Table (1)

Therefore, the number of units available for sales is 680 units, and the cost of goods available for sale is $246,300.

2.

To determine

Ascertain the number of units in ending inventory.

2.

Expert Solution
Check Mark

Explanation of Solution

Ascertain the number of units in ending inventory as follows:

DetailsNumber of Units
Total Goods available for Sale680
Less: Sales:
May 9180
May 30300
Ending Inventory200

Table (2)

Therefore, the number of units in ending inventory is 200.

3.

To determine

Ascertain the cost assigned to ending inventory under (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification.

3.

Expert Solution
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Explanation of Solution

Perpetual inventory system: The method or system of maintaining, recording, and adjusting the inventory perpetually throughout the year, is referred to as perpetual inventory system.

First-in-First-Out (FIFO): In this method, items purchased initially are sold first. So, the value of the ending inventory consist the recent cost for the remaining unsold items.

Last-in-First-Out (LIFO): In this method, items purchased recently are sold first. So, the value of the ending inventory consist the initial cost for the remaining unsold items.

Weighted-average Cost Method: In this method, the inventories are priced at the average rate of goods available for sales.

Specific identification method: Specific identification method identifies the cost of each item in ending inventory by separating purchases. In this method, the value of ending inventory is computed based on the lower of cost or market value.

Ascertain the cost assigned to ending inventory under (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification as follows:

(a) FIFO

FINANCIAL ACCOUNTING ACCT 2301 >IC<, Chapter 5, Problem 3BP , additional homework tip  1

Table (3)

Therefore, the cost of ending inventory under FIFO is $88,800.

(b) LIFO

FINANCIAL ACCOUNTING ACCT 2301 >IC<, Chapter 5, Problem 3BP , additional homework tip  2

Table (4)

Therefore, the cost of ending inventory under LIFO is 62,500.

(c) Weighted average method:

Refer working note 1 and 2 for calculation of weighted average cost

FINANCIAL ACCOUNTING ACCT 2301 >IC<, Chapter 5, Problem 3BP , additional homework tip  3

Table (5)

Therefore, the cost of ending inventory under weighed average method is $75,600.

Working note:

Calculate the weighted average cost of inventory after May 6 purchase

Weighted average cost on March 15 }(Total cost of units as on May 1+Total cost of units purchased on May 6)(Number of units as on May 1 + Number of units purchased on May 6)=$45,000+$122,500150 units + 350 units=$167,500500 units=$335 (1)

Calculate the weighted average cost of inventory after May 25 purchase

Weighted average cost on March 15 }(Total cost of units as on May 9+Total cost of units purchased on  May 17 + Total cost of units purchased on May 25)(Number of units as on May 9 + Number of units purchased on May 17 +Number of units purchased on May 25 )=$107,200 +$36,000+$45,800320 units + 80 units + 100 units=$189,000500 units=$378 (2)

(d) Specific identification method:

DetailsNumber of UnitsRate per Unit ($)Total Cost ($)
Cost of goods available for sale249,300
Less: Cost of goods sold
Beginning inventory8030024,000
May 6300350105,000
May 2510045845,800
Ending inventory74,500

Table (6)

Therefore, the cost of ending inventory under specific identification method is $74,500.

4.

To determine

Ascertain the gross profit earned by the company for the each of the given methods.

4.

Expert Solution
Check Mark

Explanation of Solution

Ascertain the gross profit earned by the company for the each of the given methods as follows:

ParticularsFIFOLIFOSpecific IdentificationWeighted Average
Sales $ 636,000 $ 636,000 $ 636,000 $ 636,000
Less: Cost of goods sold $ 160,500 $ 186,800 $ 173,700 $ 174,800
Gross profit $ 475,500 $ 449,200 $ 462,300 $ 461,200

Table (7)

5.

To determine

Identify the inventory method which is preferred by the manager, if company’s manger earns a bonus based on a percent of gross profit.

5.

Expert Solution
Check Mark

Explanation of Solution

Identify the inventory method which is preferred by the manager, if company’s manger earns a bonus based on a percent of gross profit as follows:

In this case, gross profit under FIFO method ($475,500) is more than the other three methods. Hence, the manager of Company would likely to prefer the FIFO method.

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Chapter 5 Solutions

FINANCIAL ACCOUNTING ACCT 2301 >IC<

Ch. 5 - Prob. 5DQCh. 5 - Prob. 6DQCh. 5 - Prob. 7DQCh. 5 - Prob. 8DQCh. 5 - Prob. 9DQCh. 5 - Prob. 10DQCh. 5 - Prob. 11DQCh. 5 - Prob. 12DQCh. 5 - 13. B When preparing interim financial statements,...Ch. 5 - Prob. 14DQCh. 5 - Prob. 15DQCh. 5 - Prob. 16DQCh. 5 - Prob. 17DQCh. 5 - Prob. 1QSCh. 5 - Prob. 2QSCh. 5 - Prob. 3QSCh. 5 - Prob. 4QSCh. 5 - Prob. 5QSCh. 5 - Prob. 6QSCh. 5 - Prob. 7QSCh. 5 - Prob. 8QSCh. 5 - Prob. 9QSCh. 5 - Prob. 10QSCh. 5 - Prob. 11QSCh. 5 - Prob. 12QSCh. 5 - Prob. 13QSCh. 5 - Prob. 14QSCh. 5 - Prob. 15QSCh. 5 - Prob. 16QSCh. 5 - Prob. 17QSCh. 5 - Prob. 18QSCh. 5 - Prob. 19QSCh. 5 - Prob. 20QSCh. 5 - Prob. 21QSCh. 5 - Prob. 22QSCh. 5 - Prob. 23QSCh. 5 - Prob. 1ECh. 5 - Prob. 2ECh. 5 - Prob. 3ECh. 5 - Prob. 4ECh. 5 - Prob. 5ECh. 5 - Prob. 6ECh. 5 - Prob. 7ECh. 5 - Prob. 8ECh. 5 - Prob. 9ECh. 5 - Exercise 5-10 Lower of cost or market Martinez...Ch. 5 - Prob. 11ECh. 5 - Prob. 12ECh. 5 - Prob. 13ECh. 5 - Prob. 14ECh. 5 - Prob. 15ECh. 5 - Prob. 16ECh. 5 - Prob. 17ECh. 5 - Prob. 18ECh. 5 - Prob. 1APCh. 5 - Problem 5-1A Perpetual: Alternative cost...Ch. 5 - Prob. 3APCh. 5 - Prob. 4APCh. 5 - Prob. 5APCh. 5 - Prob. 6APCh. 5 - Prob. 7APCh. 5 - Prob. 8APCh. 5 - Prob. 9APCh. 5 - Prob. 10APCh. 5 - Prob. 1BPCh. 5 - Prob. 2BPCh. 5 - Prob. 3BPCh. 5 - Prob. 4BPCh. 5 - Prob. 5BPCh. 5 - Prob. 6BPCh. 5 - Prob. 7BPCh. 5 - Prob. 8BPCh. 5 - Prob. 9BPCh. 5 - Prob. 10BPCh. 5 - Prob. 5SPCh. 5 - Prob. 1BTNCh. 5 - Prob. 2BTNCh. 5 - Prob. 3BTNCh. 5 - Prob. 4BTNCh. 5 - Prob. 5BTNCh. 5 - BTN 5-7 Review the chapter’s opening feature...Ch. 5 - Prob. 9BTN
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