Connect Access Card For Fundamental Accounting Principles
Connect Access Card For Fundamental Accounting Principles
24th Edition
ISBN: 9781260158526
Author: John J Wild
Publisher: McGraw-Hill Education
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Chapter 6, Problem 3APSA

Requirement 1:

To determine

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.

TheCost and number of units available for sale.

Requirement 1:

Expert Solution
Check Mark

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 available for sale




    UNITS
    COST PU
    AMOUNT
    Beginning Inventory Jan-1
    600
    45
    27000
    Purchases:



    Feb-10 Purchases
    400
    42
    16800
    Mar-13 Purchases
    200
    27
    5400
    Aug-21 Purchases
    100
    50
    5000
    Sept-5 Purchases
    500
    46
    23000
    Goods available for sale
    1800

    77200

Requirement 2:

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
Check Mark

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
    1800
    Purchase

    15-Mar
    800
    10-Sep
    600
    Ending Inventory Units
    400

Requirement 3-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
Check Mark

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 GOODS SOLD
    BALANCE
    DATE
    UNITS
    RATE
    AMOUNT $
    UNITS
    RATE
    AMOUNT $
    UNITS
    RATE
    AMOUNT $
    1-Jan






    600
    45
    27000
    10-Feb
    400
    42
    16800



    600
    45
    27000







    400
    42
    16800
    13-Mar
    200
    27
    5400



    600
    45
    27000







    400
    42
    16800







    200
    27
    5400
    15-Mar



    600
    45
    27000
    200
    42
    8400




    200
    42
    8400
    200
    27
    5400
    21-Aug
    100
    50
    5000



    200
    42
    8400







    200
    27
    5400







    100
    50
    5000
    5-Sep
    500
    46
    23000



    200
    42
    8400







    200
    27
    5400







    100
    50
    5000







    500
    46
    23000
    10-Sep



    200
    42
    8400







    200
    27
    5400







    100
    50
    5000







    100
    46
    4600
    400
    46
    18400
    TOTAL
    1200

    50200
    1400

    58800
    400

    18400

Therefore, Ending Inventory is 400 units of $18400.

Requirement 3-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
Check Mark

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 GOODS SOLD
    BALANCE
    DATE
    UNITS
    RATE
    AMOUNT $
    UNITS
    RATE
    AMOUNT $
    UNITS
    RATE
    AMOUNT $
    1-Jan






    600
    45
    27000
    10-Feb
    400
    42
    16800



    600
    45
    27000







    400
    42
    16800
    13-Mar
    200
    27
    5400



    600
    45
    27000







    400
    42
    16800







    200
    27
    5400
    15-Mar



    200
    27
    5400







    400
    42
    8400







    200
    45
    9000
    400
    45
    18000
    21-Aug
    100
    50
    5000



    400
    45
    18000







    100
    50
    5000
    5-Sep
    500
    46
    23000



    400
    45
    18000







    100
    50
    5000







    500
    46
    23000
    10-Sep



    500
    46
    23000







    100
    50
    5000
    400
    45
    18000
    TOTAL
    1200

    50200
    1400

    59200
    400

    18000

Therefore, Ending Inventory is 400 units of $ 18000.

Requirement 3-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 GOODS SOLD
    BALANCE
    DATE
    UNITS
    RATE
    AMOUNT $
    UNITS
    RATE
    AMOUNT $
    UNITS
    RATE
    AMOUNT $
    1-Jan






    600
    45
    27000
    10-Feb
    400
    42
    16800



    600
    45
    27000







    400
    42
    16800
    13-Mar
    200
    27
    5400



    600
    45
    27000







    400
    42
    16800







    200
    27
    5400
    Average






    1200
    41
    49200
    15-Mar



    800
    41
    32800
    400
    41
    16400
    21-Aug
    100
    50
    5000



    400
    41
    16400







    100
    50
    5000
    5-Sep
    500
    46
    23000



    400
    41
    16400







    100
    50
    5000







    500
    46
    23000
    Average






    1000
    44.4
    44400
    10-Sep



    600
    44.4
    26640
    400
    44.4
    17760
    TOTAL
    1200

    50200
    1400

    59440
    500

    17760

Therefore, Ending Inventory is 400 units of $17760.

Requirement 3-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 PERIODIC SPECIFIC IDENTIFICATION METHOD

    RECIEPTS
    COST OF GOODS GOODS SOLD
    BALANCE
    DATE
    UNITS
    RATE
    AMOUNT $
    UNITS
    RATE
    AMOUNT $
    UNITS
    RATE
    AMOUNT $
    Balance Oct1
    600
    45
    27000
    600
    45
    27000



    Purchase









    10-Feb
    400
    42
    16800
    300
    42
    12600
    100
    42
    4200
    13-Mar
    200
    27
    5400
    200
    27
    5400



    21-Aug
    100
    50
    5000
    50
    50
    2500
    50
    50
    2500
    5-Sep
    500
    46
    23000
    250
    46
    11500
    250
    46
    11500
    TOTAL
    1800

    77200
    1400

    59000
    400

    18200

Therefore, Ending Inventory is 400 units of $18200.

Requirement 4:

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:

Connect Access Card For Fundamental Accounting Principles, Chapter 6, Problem 3APSA

Requirement 5:

To determine

The Method to be preferred so as to generate higher bonus.

Requirement 5:

Expert Solution
Check Mark

Explanation of Solution

As the bonus is based on gross profit, the method shall be preferred which will give provide lowest cost of goods sold. Therefore, as per above computations, the FIFO method shall be followed as its gives the lowest cost of goods sold and resultant higher gross profit.

The FIFO method of Inventory valuation shall be preferred.

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Chapter 6 Solutions

Connect Access Card For Fundamental Accounting Principles

Ch. 6 - Prob. 11DQCh. 6 - Prob. 12DQCh. 6 - Inventory ownership Homestead Crafts, a...Ch. 6 - QS 6-2 Inventory costs C2 A car dealer acquires a...Ch. 6 - Prob. 3QSCh. 6 - Perpetual: Inventory costing with FIFO P1 A...Ch. 6 - Perpetual: Inventory costing with LIFO Refer to...Ch. 6 - Perpetual Inventory costing with weighted average...Ch. 6 - Periodic: Inventory costing with FIFO P3 Refer to...Ch. 6 - Periodic: Inventory costing with LIFO Refer to the...Ch. 6 - Periodic: Inventory costing with weighted average...Ch. 6 - Perpetual: Assigning costs with FIFO Trey Monson...Ch. 6 - QS6-11 Perpetual Inventory costing with LIFO Refer...Ch. 6 - QS 6-12 Perpetual: Inventory costing with weighted...Ch. 6 - QS6.13 Perpetual Inventory costing with specific...Ch. 6 - Periodic: Inventory costing with FIFO P3 Refer to...Ch. 6 - Periodic Inventory costing with LIFO P3 Refer to...Ch. 6 - Periodic: Inventory costing with weighted average...Ch. 6 - Periodic: Inventory costing with specific...Ch. 6 - QS 6-18 Contrasting inventory costing methods...Ch. 6 - Prob. 19QSCh. 6 - Inventory errors A2 In taking a physical inventory...Ch. 6 - Analyzing inventory A3 Endor Company begins the...Ch. 6 - Prob. 22QSCh. 6 - Inventory costs C2 A solar panel dealer acquires a...Ch. 6 - Exercise 6-1 Inventory ownership C1 1. At...Ch. 6 - Exercise 6-2 Inventory costs C2 Walberg...Ch. 6 - Exercise 6-3 Perpetual Inventory costing methods...Ch. 6 - Exercise 6-4 Perpetual: Income effects of...Ch. 6 - Exercise 6-5A Periodic: Inventory costing P3 Refer...Ch. 6 - Exercise 6-6A Periodic: Income effects of...Ch. 6 - Exercise 6-7 Perpetual Inventory costing...Ch. 6 - Exercise 6.8 Specific identification Refer to the...Ch. 6 - Prob. 9ECh. 6 - Prob. 10ECh. 6 - Prob. 11ECh. 6 - Prob. 12ECh. 6 - Exercise 6-13 Inventory turnover and days' sales...Ch. 6 - Prob. 14ECh. 6 - Prob. 15ECh. 6 - Prob. 16ECh. 6 - Prob. 17ECh. 6 - Exercise 6-1E Perpetual inventory costing P1 Tree...Ch. 6 - Exercise 6-19APeriodic inventory costing P3 I...Ch. 6 - Problem 6-1A Perpetual: Alternative cost...Ch. 6 - Prob. 2APSACh. 6 - Prob. 3APSACh. 6 - Prob. 4APSACh. 6 - Problem 6-5A Lower of cost or market P2 A physical...Ch. 6 - Prob. 6APSACh. 6 - Prob. 7APSACh. 6 - Prob. 8APSACh. 6 - Prob. 9APSACh. 6 - Prob. 10APSACh. 6 - Prob. 1BPSBCh. 6 - Prob. 2BPSBCh. 6 - Prob. 3BPSBCh. 6 - Prob. 4BPSBCh. 6 - Prob. 5BPSBCh. 6 - Prob. 6BPSBCh. 6 - Prob. 7BPSBCh. 6 - Prob. 8BPSBCh. 6 - Prob. 9BPSBCh. 6 - Prob. 10BPSBCh. 6 - Prob. 6SPCh. 6 - AA 6-1 Use Apple's financial statements in...Ch. 6 - AA 6-2 Comparative figures for Apple and Google...Ch. 6 - Prob. 3AACh. 6 - BTN 6-3 Golf Challenge Corp. is a retail sports...Ch. 6 - Prob. 2BTNCh. 6 - Prob. 3BTNCh. 6 - Prob. 4BTNCh. 6 - Prob. 5BTNCh. 6 - Prob. 6BTN
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