Financial Accounting
Financial Accounting
5th Edition
ISBN: 9781259914898
Author: SPICELAND
Publisher: MCG
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Chapter 6, Problem 1PA

1.

To determine

Compute the ending inventory and cost of goods sold using the specific identification method.

1.

Expert Solution
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Explanation of Solution

Specific identification method:

Specific identification method is a method in which the company records each item of the inventory at its original cost. Under this method, when the goods are sold, the company can easily identify the original costs at which they were purchased for. This method helps in arriving at the accurate cost of goods sold, and ending inventory.

Calculate the units of ending inventory.

Calculation of Ending Inventory
DetailsNumber of UnitsRate Per Unit ($)Total Cost ($)
Beginning balance6
Less: Sales - October 4(4)
Balance2
Less: Sales - October 13(1)
Balance1900900
Purchases:
October 105
Less: Sales - October 13(2)
Less: Sales - October 28(3)
Balance09100
Purchases:
October 204
Less: October 28(4)
Balance0920
October 3079306,510
Ending Inventory7,410

Table (1)

Therefore, the cost of Ending Inventory in specific identification method is $7,410.

Calculate the cost of goods sold:

Calculation of Cost of Goods Sold
DetailsNumber of UnitsRate Per Unit ($)Total Cost ($)
October 1: Beginning balance49003,600
October 1: Beginning balance1900900
October 10: Purchase29101,820
October 10: Purchase39102,730
October 20: Purchase49203,680
Cost of Goods Sold1412,730

Table (2)

Therefore, the Cost of Goods Sold in specific identification method is $12,730.

2.

To determine

Compute the ending inventory and cost of goods sold using the FIFO method.

2.

Expert Solution
Check Mark

Explanation of Solution

First-in-First-Out:

In First-in-First-Out method, the costs of the initially purchased items are considered as cost of goods sold, for the items which are sold first. The value of the ending inventory consists of the recent purchased items.

Calculate the total Cost and units of Goods Available for Sales.

Calculation of Goods Available for Sales
DetailsNumber of UnitsRate per unit ($)Total Cost ($)
Beginning balance69005,400
Add: Purchases
October 1059104,550
October 2049203,680
October 3079306,510
Total Goods available for Sale2220,140

Table (3)

Calculate the units of ending inventory.

Calculation of Ending Inventory (Units)
DetailsNumber of UnitsNumber of Units
Beginning balance6
Add: Purchases
October 105
October 204
October 307
Total Goods available for Sale22
Less: Sales
October 44
October 133
October 287
Total Sales(14)
Ending Inventory8

Table (4)

Calculate the cost of ending inventory.

The ending inventory is 8 units.

Calculation of Cost of Ending Inventory
DetailsNumber of UnitsRate per Unit ($)Total Cost ($)
October 201920920
October 3079306,510
Ending Inventory87,430

Table (5)

In FIFO method the ending inventory comprises of the inventory purchased last, because the inventory purchased first were sold first.

Therefore, the cost of Ending Inventory in the FIFO is $7,430.

Cost of Goods Sold.

14 units are sold.

Calculation of Cost of Goods Sold
DetailsNumber of UnitsRate per Unit ($)Total Cost ($)
Beginning Inventory69005,400
March 9 Purchase59104,550
March 22 Purchase39202,760
Cost of Goods Sold1412,710

Table (6)

As it is FIFO method the earlier purchased items will sell first.

Therefore, the Cost of Goods Sold in the FIFO Method is $12,710

3.

To determine

Compute the ending inventory and cost of goods sold using the LIFO method.

3.

Expert Solution
Check Mark

Explanation of Solution

Last-in-Last-Out:

In Last-in-First-Out method, the costs of last purchased items are considered as the cost of goods sold, for the items which are sold first. The value of the closing stock consists of the initial purchased items.

Ending Inventory:

Calculate the cost of ending inventory.

Calculation of Cost of Ending Inventory
DetailsNumber of UnitsRate per Unit ($)Total Cost ($)
Beginning Inventory69005,400
October 1029101,820
Ending Inventory87,220

Table (7)

  • The ending inventory is 8 units (Refer to Table 4).
  • In LIFO method, the ending inventory comprises of the inventory purchased first, because the inventory purchased last were sold first.
  • Therefore, the ending inventory of 8 units is from the beginning inventory.

Therefore, the cost of Ending Inventory in the LIFO method is $7,220.

Cost of Goods Sold:

DetailsNumber of UnitsRate per unit ($)Total Cost ($)
October10 Purchase39102,730
October20 Purchase49203,680
October30 Purchase79306,510
Cost of Goods Sold142,76012,920

Table (8)

  • 14 units are sold (Refer to Table 4).
  • As it is LIFO method the recent purchased items will sell first.
  • Hence, the cost of goods sold will be the recent purchased items.

Therefore, the Cost of Goods Sold in the LIFO Method is $12,920.

4.

To determine

Compute the ending inventory and cost of goods sold using the weighted-average method.

4.

Expert Solution
Check Mark

Explanation of Solution

Weighted-average cost method:

Under Weighted average cost method, the company calculates a new average cost after every purchase is made. It is determined by dividing the cost of goods available for sale by the units on hand.

Calculate the Weighted-average cost.

Total cost of goods available for sale = $20,140 (Refer to table - 3)

Total units of goods available for sale = 22 units (Refer to table - 3)

Weighted-averageCost}=Total Cost of Goods Available For SaleTotal number of units Available for Sale=$20,14022 Units=$915.45 (1)

Calculate the amount of Ending Inventory.

Weighted- average cost per unit = $915.45 (1)

Number of units in ending inventory = 8 units (Refer to table - 4)

Cost of Ending inventory=((Number of units inEnding inventory) ×Weighted-average cost per unit)=8units × $915.45=$7,323.6 (2)

Therefore, the cost of Ending Inventory in the Weighted-average-cost Method is $7,323.6.

Calculate the Cost of Goods Sold.

Weighted- average cost per unit= $915.45 (1)

Units sold = 14 units

Cost of Goods Sold=(Number of units Sold ×Weighted-average cost per unit)=14 units×$915.45=$12,816.30 (3)

Therefore, the Cost of goods sold in the Weighted-average-cost Method is $12,816.30.

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Chapter 6 Solutions

Financial Accounting

Ch. 6 - 11. Maxwell Corporation has the following...Ch. 6 - Prob. 12SSQCh. 6 - Prob. 13SSQCh. 6 - Prob. 14SSQCh. 6 - Prob. 15SSQCh. 6 - Prob. 1AECh. 6 - Prob. 2AECh. 6 - Prob. 1RQCh. 6 - Prob. 2RQCh. 6 - Prob. 3RQCh. 6 - Prob. 4RQCh. 6 - Prob. 5RQCh. 6 - 6. What is a multiple-step income statement? What...Ch. 6 - Prob. 7RQCh. 6 - Prob. 8RQCh. 6 - Prob. 9RQCh. 6 - Prob. 10RQCh. 6 - Prob. 11RQCh. 6 - 12. Explain how LIFO generally results in lower...Ch. 6 - Prob. 13RQCh. 6 - Prob. 14RQCh. 6 - Prob. 15RQCh. 6 - Prob. 16RQCh. 6 - Prob. 17RQCh. 6 - Prob. 18RQCh. 6 - Prob. 19RQCh. 6 - Prob. 20RQCh. 6 - Prob. 21RQCh. 6 - Prob. 22RQCh. 6 - Prob. 23RQCh. 6 - Prob. 24RQCh. 6 - Prob. 1BECh. 6 - Prob. 2BECh. 6 - Prob. 3BECh. 6 - Prob. 4BECh. 6 - Prob. 5BECh. 6 - Prob. 6BECh. 6 - Prob. 7BECh. 6 - Prob. 8BECh. 6 - Prob. 9BECh. 6 - Prob. 10BECh. 6 - Prob. 11BECh. 6 - Prob. 12BECh. 6 - Prob. 13BECh. 6 - Prob. 14BECh. 6 - Prob. 15BECh. 6 - Prob. 16BECh. 6 - BE6-17 Refer to the information in BE6-10, but now...Ch. 6 - Prob. 18BECh. 6 - Prob. 19BECh. 6 - BE6–20 Refer to the information in BE6–13, but now...Ch. 6 - Prob. 21BECh. 6 - Prob. 22BECh. 6 - Prob. 1ECh. 6 - Prob. 2ECh. 6 - Prepare a multiple-step income statement and...Ch. 6 - Prob. 4ECh. 6 - Prob. 5ECh. 6 - E6-6 Bingerton Industries began the year with...Ch. 6 - Prob. 7ECh. 6 - Prob. 8ECh. 6 - Prob. 9ECh. 6 - Prob. 10ECh. 6 - Prob. 11ECh. 6 - Prob. 12ECh. 6 - Calculate inventory using lower of cost and net...Ch. 6 - Calculate inventory using lower of cost and net...Ch. 6 - Prob. 15ECh. 6 - Prob. 16ECh. 6 - Prob. 17ECh. 6 - Prob. 18ECh. 6 - Prob. 19ECh. 6 - Prob. 20ECh. 6 - Prob. 21ECh. 6 - Prob. 1PACh. 6 - Prob. 2PACh. 6 - Prob. 3PACh. 6 - Prob. 4PACh. 6 - Prob. 5PACh. 6 - Prob. 6PACh. 6 - Prepare a multiple-step Income statement and...Ch. 6 - P6-8A Wawa Food Markets is a convenience store...Ch. 6 - Prob. 9PACh. 6 - Correct inventory Understatement and calculate...Ch. 6 - Prob. 1PBCh. 6 - Prob. 2PBCh. 6 - Prob. 3PBCh. 6 - Prob. 4PBCh. 6 - Prob. 5PBCh. 6 - Prob. 6PBCh. 6 - Prob. 7PBCh. 6 - Prob. 8PBCh. 6 - Prob. 9PBCh. 6 - Prob. 10PBCh. 6 - Prob. 1APCh. 6 - American Eagle Outfitters, Inc. AP6-2 Financial...Ch. 6 - Prob. 3APCh. 6 - Prob. 4APCh. 6 - Ethics AP6-5 Horizon Corporation manufactures...Ch. 6 - Prob. 6APCh. 6 - Prob. 7APCh. 6 - Prob. 8AP
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