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 4BP

1.

To determine

Compute cost of goods available for sale and the number of units available for sale.

1.

Expert Solution
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Explanation of Solution

Calculate cost of goods available for sale and the number of units available for sale.

Cost of Goods Available For Sale
DateParticularsUnits (A)Per Unit (B)Amount (A× B)
May 1Beginning Inventory150$300$45,000
May 6Purchase350$350$122,500
May 17Purchase80$450$36,000
May 25Purchase100$458$45,800
Total      680$249,300

Table (1)

Therefore, total cost of goods available for sale amount is $249,300, and the number of units available for sale is 680 units.

2.

To determine

Compute the number of units in ending inventory.

2.

Expert Solution
Check Mark

Explanation of Solution

Calculate number of units in ending inventory as follows:

Ending inventory (units)= Cost of Goods available for sale Cost of goods sold=680units480units=200units

Working note:

Calculate cost of goods sold.

Cost of goods sold = 9th May sale + 30th May sale= 180units + 300units= 480units (1)

3.

To determine

Compute the cost assigned to ending inventory using the following methods:

  1. (a) FIFO
  2. (b) LIFO
  3. (c) Weighted average, and
  4. (d) Specific identification.

3.

Expert Solution
Check Mark

Explanation of Solution

(a)

Compute the cost assigned to ending inventory using FIFO method as follows:

DateParticularsUnits (A)Per Unit (B)Amount (A× B)
May 25Ending Inventory100$458$45,800
May 17Ending Inventory80$450$36,000
May 6Ending Inventory20$350$7,000
Total Ending inventory200$88,800

Table (2)

(b)

Compute the cost assigned to ending inventory using LIFO method as follows:

DateParticularsUnits (A)Per Unit (B)Amount (A× B)
May 1Ending Inventory150$300$45,000
May 6Ending Inventory50$350$17,500
Total Ending inventory200$62,500

Table (3)

(c)

Compute the cost assigned to ending inventory using weighted average method as follows:

Ending inventory cost=Ending inventory units ×Weighted averageper unit=200units ×$366.62per unit= $73,324

Working note:

Calculate weighted average per unit.

Weighted average per unit = Total cost of goods available for salein amountTotal cost of goods avail for salein units=$249,300680units=$366.62per unit (2)

(d)

Compute the cost assigned to ending inventory using specific identification method as follows:

DateParticularsUnits (A)Per Unit (B)Amount (A× B)
May 1Ending Inventory70$300$21,000
May 6Ending Inventory50$350$17,500
May 17Ending Inventory80$450$36,000
Total Ending inventory400$74,500

Table (4)

4.

To determine

Compute gross profit earned by the company for each of the four costing methods in part 3.

4.

Expert Solution
Check Mark

Explanation of Solution

Calculate gross profit earned by the company for each of the four costing methods as follows:

ParticularsFIFOLIFOWeighted AverageSpecific Identification
Sales$636,000$636,000$636,000$636,000
Less: Cost of goods sold$160,500$186,800$175,976$174,800
Gross profit$475,500$449,200$460,024$461,200

Table (5)

Working notes:

Calculate sales amount.

Salesamount =(180units ×$1,200)+(300units×$1,400)=$216,000+$420,000=$636,000 (3)

Calculate cost of goods sold.

ParticularsFIFOLIFOWeighted AverageSpecific Identification
Cost of goods available for sale$249,300$249,300$249,300$249,300
Less: Ending Inventory$88,800$62,500$73,324$74,500
Cost of goods sold$160,500$186,800$175,976$174,800

Table (6)

5.

To determine

Identify the method of inventory costing which the manager will prefer, if he earns a bonus based on a percentage of gross profit.

5.

Expert Solution
Check Mark

Explanation of Solution

The Manger would prefer a FIFO method, because comparing to all four methods FIFO method only giving more income.  If he prefers, FIFO method means, he will get a bonus based on a percentage of gross profit.

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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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