FUND.ACCT.PRIN -ONLINE ONLY  >I<
FUND.ACCT.PRIN -ONLINE ONLY >I<
22nd Edition
ISBN: 9780077632878
Author: Wild
Publisher: MCG
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Chapter 6, Problem 1APSA
To determine

Requirement1:

Concept Introduction:

Goods available for sale:

The Goods available for sale means that the total goods in hand which can be offered to the customers for sale. This can be expressed in terms of dollars and units. The Total Goods in hand can be computed as a sum of inventory in hand in the beginning of the period and Inventories purchased during the period.

To Determine: TheCost and number of units available for sale.

Expert Solution
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Explanation of Solution

TheCost of goods available for sale is computed by adding up the cost of goods in hand in the beginning of the period and cost of inventory purchased during the period. And the number of units available f or sale is computed as on the same lines but in units terms.

Cost and Units of Goods available for sale:  
DATE UNITS RATE AMOUNT $
Mar 1: Beg. Inventory 100 50 5000
Purchases      
5-Mar 400 55 22000
18-Mar 120 60 7200
25-Mar 200 62 12400
Goods Available for sale 820   46600
To determine

Requirement2:

Ending Inventory:

Ending Inventory units means the number of units left over from the total goods available for sale after units sold deducted from it.

To determine: The Number of Ending Inventory Units.

Expert Solution
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Explanation of Solution

The ending Inventory units is a difference between units of goods available for sale and units sold and has been computed as under:

Ending Inventory Units:  
  UNITS
Units available for sale 820
Less: Units sold  
Mar-9 Sales 420
Mar-29 Sales 160
Ending Inventory Units: 240
To determine

Requirement3-a:

First in First Out: The first in first out method of assigning the cost to goods sold is based on the principle that the goods that are entered first in the store room shall be issued first for sale and hence the cost shall be recorded at its initial prices of goods entered in store room. The perpetual Inventory system means the records are maintained on a continuous basis.

To determine: The Cost assigned to ending Inventory under FIFO.

Expert Solution
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Explanation of Solution

The FIFO method of perpetual inventory suggests that the goods issued for sale on a particular date shall be assigned cost on the basis of cost of oldest material lies in the store on that particular date.

The Ending Inventory shall be computed as under:

STATEMENT SHOWING INVENTORY RECORD UNDER PERPETUAL FIFO METHOD
  RECIEPTS COST OF GOODS SOLD BALANCE
DATE UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ UNITS RATE AMOUNT $
1-Mar             100 50 5000
5-Mar 400 55 22000       100 50 5000
              400 55 22000
9-Mar       100 50 5000      
        320 55 17600 80 55 4400
18-Mar 120 60 7200       80 55 4400
              120 60 7200
25-Mar 200 62 12400       80 55 4400
              120 60 7200
              200 62 12400
29-Mar       80 55 4400 40 60 2400
        80 60 4800 200 62 12400
TOTAL 720   41600 580   31800 240   14800

Therefore, Ending Inventory is 240 units of $14800.

To determine

Requirement3-b:

Last in First Out: The Last in first out method of assigning the cost to goods sold is based on the principle that the goods that are entered recently in the store room shall be issued first for sale and hence the cost shall be recorded at its recent prices of goods entered in store room. The perpetual Inventory system means the records are maintained on a continuous basis.

To determine: The Cost assigned to ending Inventory under LIFO.

Expert Solution
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Explanation of Solution

The LIFO method of perpetual inventory suggests that the goods issued for sale on a particular date shall be assigned cost on the basis of cost of newest material lies in the store on that particular date.

The Ending Inventory shall be computed as under:

STATEMENT SHOWING INVENTORY RECORD UNDER PERPETUAL LIFO METHOD
  RECIEPTS COST OF GOODS SOLD BALANCE
DATE UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ UNITS RATE AMOUNT $
1-Mar             100 50 5000
5-Mar 400 55 22000       100 50 5000
              400 55 22000
9-Mar       400 55 22000      
        20 50 1000 80 50 4000
18-Mar 120 60 7200       80 50 4000
              120 60 7200
25-Mar 200 62 12400       80 50 4000
              120 60 7200
              200 62 12400
29-Mar       160 62 9920 80 50 4000
              120 60 7200
              40 62 2480
TOTAL 720   41600 580   32920 240   13680

Therefore, Ending Inventory is 240 units of $13680.

To determine

Requirement3-c:

Weighted Average: The Weighted Average method of issuing inventory is based on principle that the goods shall be issued at a average of prices of goods which are lying in the store room at the time of issuing for sale. The perpetual Inventory system means the records are maintained on a continuous basis.

To determine: The Cost assigned to ending Inventory under Weighted average.

Expert Solution
Check Mark

Explanation of Solution

The Weighted Average method of perpetual inventory suggests that the goods issued for sale on a particular date shall be assigned cost on the basis of average cost of material lies in the store on that particular date.

The Ending Inventory shall be computed as under:

STATEMENT SHOWING INVENTORY RECORD UNDER PERPETUAL WEIGHTED AVERAGE METHOD
  RECIEPTS COST OF GOODS SOLD BALANCE
DATE UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ UNITS RATE AMOUNT $
1-Mar             100 50 5000
5-Mar 400 55 22000       100 50 5000
              400 55 22000
Average             500 54 27000
9-Mar       420 54 22680 80 54 4320
18-Mar 120 60 7200       80 54 4320
              120 60 7200
25-Mar 200 62 12400       80 54 4320
              120 60 7200
              200 62 12400
Average             400 59.8 23920
29-Mar       160 59.8 9568 240 59.8 14352
TOTAL 720   41600 580   32248 240 59.8 14352

Therefore, Ending Inventory is 240 units of $14,352.

To determine

Requirement3-d:

Specific Identification: Specific Identification method of assigning the cost to goods sold is based on the principle that the goods that have been issued for sale has been specifically identified to be issued from the particular lot of material. Therefore, the cost of that particular lot shall be assigned on the same. The perpetual Inventory system means the records are maintained on a continuous basis.

To determine: The Cost assigned to ending Inventory under Specific Identification.

Expert Solution
Check Mark

Explanation of Solution

The Specific Identification method of perpetual inventory suggests that the goods issued for sale on a particular date shall be assigned cost on the basis of cost of material specifically identified as issued from the store on that particular date.

The Ending Inventory shall be computed as under:

STATEMENT SHOWING INVENTORY RECORD UNDER PERPETUAL SPECIFIC IDENTIFICATION METHOD
  RECIEPTS COST OF GOODS SOLD BALANCE
DATE UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ UNITS RATE AMOUNT $
1-Mar             100 50 5000
5-Mar 400 55 22000       100 50 5000
              400 55 22000
9-Mar       80 50 4000 20 50 1000
        340 55 18700 60 55 3300
18-Mar 120 60 7200       20 50 1000
              60 55 3300
              120 60 7200
25-Mar 200 62 12400       20 50 1000
              60 55 3300
              120 60 7200
              200 62 12400
29-Mar       40 60 2400 20 50 1000
        120 62 7440 60 55 3300
              80 60 4800
              80 62 4960
TOTAL 720   41600 580   32540 240   14060

Therefore, Ending Inventory is 240 units of $14060.

To determine

Requirement4:

Gross Profits: Gross Profits means excess of sales revenue over the cost of goods sold.

To determine:Gross profits earned by the company under various methods.

Expert Solution
Check Mark

Explanation of Solution

The Gross profits is computed as a difference between the sales revenue and cost of goods sold as assigned under various methods and has been computed as under:

Statement showing Gross Profits earned:        
  FIFO LIFO Weighted Specific
      Average Identification
Sales revenue:        
9-Mar 420 units @ 85 per unit 35700 35700 35700 35700
29-Mar 160 units @ 95 per unit 15200 15200 15200 15200
Total sales revenue 50900 50900 50900 50900
Less: Cost of goods sold (as computed Above) 31800 32920 32248 32540
Gross Margin 19100 17980 18652 18360

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Chapter 6 Solutions

FUND.ACCT.PRIN -ONLINE ONLY >I<

Ch. 6 - Prob. 11DQCh. 6 - Prob. 12DQCh. 6 - Prob. 13DQCh. 6 - Prob. 14DQCh. 6 - Prob. 15DQCh. 6 - Prob. 16DQCh. 6 - Prob. 17DQCh. 6 - Prob. 1QSCh. 6 - Prob. 2QSCh. 6 - Prob. 3QSCh. 6 - Prob. 4QSCh. 6 - Prob. 5QSCh. 6 - QS 64 Perpetual Inventory costing with weighted...Ch. 6 - Periodic: Inventory costing with FIFO P3 Refer to...Ch. 6 - Prob. 8AQSCh. 6 - Prob. 9AQSCh. 6 - Prob. 10QSCh. 6 - Prob. 11QSCh. 6 - Prob. 12QSCh. 6 - Prob. 13QSCh. 6 - Prob. 14AQSCh. 6 - Prob. 15AQSCh. 6 - Prob. 16AQSCh. 6 - Prob. 17AQSCh. 6 - Prob. 18QSCh. 6 - Prob. 19QSCh. 6 - Inventory errors A2 In taking a physical inventory...Ch. 6 - Prob. 21QSCh. 6 - Prob. 22BQSCh. 6 - International accounting standards C2 P2 Answer...Ch. 6 - Exercise 6.1 Inventory ownership I. At rear-end,...Ch. 6 - Exercise 6-2 Inventory costs C2 Walberg...Ch. 6 - Prob. 3ECh. 6 - Prob. 4ECh. 6 - Prob. 5AECh. 6 - Exercise 6-6A Periodic: Income effects of...Ch. 6 - Prob. 7ECh. 6 - Prob. 8ECh. 6 - Prob. 9AECh. 6 - Prob. 10ECh. 6 - Prob. 11ECh. 6 - Prob. 12ECh. 6 - Prob. 13ECh. 6 - Prob. 14AECh. 6 - Prob. 15ECh. 6 - Prob. 16BECh. 6 - Prob. 17BECh. 6 - Prob. 18ECh. 6 - Prob. 1APSACh. 6 - Prob. 2AAPSACh. 6 - Prob. 3APSACh. 6 - Prob. 4AAPSACh. 6 - Prob. 5APSACh. 6 - Prob. 6APSACh. 6 - Prob. 7AAPSACh. 6 - Prob. 8AAPSACh. 6 - Prob. 9ABPSACh. 6 - Prob. 10BAPSACh. 6 - Prob. 1BPSBCh. 6 - Problem 6-2BA Periodic: Alternative cost...Ch. 6 - Prob. 3BPSBCh. 6 - Prob. 4BAPSBCh. 6 - Prob. 5BPSBCh. 6 - Prob. 6BPSBCh. 6 - Problem 6-7BA Periodic: Alternative cost flows P3...Ch. 6 - Problem 6-8BA Periodic: Income comparisons and...Ch. 6 - Prob. 9BBPSBCh. 6 - Prob. 10BBPSBCh. 6 - Prob. 6SPCh. 6 - Prob. 1BTNCh. 6 - Prob. 2BTNCh. 6 - Prob. 3BTNCh. 6 - Prob. 4BTNCh. 6 - Prob. 5BTNCh. 6 - Prob. 6BTNCh. 6 - Prob. 7BTNCh. 6 - Prob. 8BTNCh. 6 - Prob. 9BTN
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