Question

PROBLEM SET A connect Problem 6-1A Perpetual: Alternative cost flows P1 Warnerwoods Company uses a perpetual inventory system. It entered into the following purchases and sales transactions for March. (For specific identification, the March 9 sale consisted of 8o units from beginning inventory and 340 units from the March 5 purchase; the March 29 sale consisted of 40 units from the March 18 purchase and 120 units from the March 25 purchase.) Date Activities Units Acquired at Cost Units Sold at Retail 420 units @ $85.00 per unit Mar. 1 Beginning inventory 100 units @ $50.00 per unit Mar. 5 Purchase 400 units @ $55.00 per unit Mar. 9 Sales Mar. 18 Purchase 120 units @ $60.00 per unit Mar.25 Purchase 200 units @ $62.00 per unit Mar. 29 Sales Totals 820 units 160 units @ $95.00 per unit 580 units Required 1. Compute cost of goods available for sale and the number of units available for sale. 2. Compute the number of units in ending inventory. 3. Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (e) weighted average, and (d) specific identification. (Round all amounts to cents.) Check (3) Ending inventory. FIFO, $14,800; LIFO, $13,680; WA $14,352 4. Compute gross profit earned by the company for each of the four costing methods in part 3. (4) LIFO gross profit, $17,980

Answer 1

1.

		Cost of goods available for sale
Date	Activity	Units	Unit Price	Amount
Mar-01	Beginning Inventory	100	$               50.00	$        5,000.00
Mar-05	Purchase	400	$               55.00	$      22,000.00
Mar-18	Purchase	120	$               60.00	$        7,200.00
Mar-25	Purchase	200	$               62.00	$      12,400.00
	Total	820		$     46,600.00

2. Units in ending inventory = 820-580 = 240 units

3. (a) FIFO

	FIFO	Cost of goods available for sale			Cost of Goods Sold			Ending Balance
Date	Activity	Units	Unit Price	Amount	Units	Unit Price	Amount	Units	Unit Price	Amount
Mar-01	Beginning Inventory	100	$               50.00	$        5,000.00				100	$      50.00	$       5,000.00
Mar-05	Purchase	400	$               55.00	$      22,000.00				100	$      50.00	$       5,000.00
								400	$      55.00	$     22,000.00
Mar-09	Sales				100	$          50.00	$         5,000.00
					320	$          55.00	$       17,600.00	80	$      55.00	$       4,400.00
Mar-18	Purchase	120	$               60.00	$        7,200.00				80	$      55.00	$       4,400.00
								120	$      60.00	$       7,200.00
Mar-25	Purchase	200	$               62.00	$      12,400.00				80	$      55.00	$       4,400.00
								120	$      60.00	$       7,200.00
								200	$      62.00	$     12,400.00
Mar-29	Sales				80	$          55.00	$         4,400.00
					80	$          60.00	$         4,800.00	40	$      60.00	$       2,400.00
								200	$      62.00	$     12,400.00
	Total	820		$     46,600.00	580		$      31,800.00	240		$     14,800.00

(b) LIFO

	LIFO	Cost of goods available for sale			Cost of Goods Sold			Ending Balance
Date	Activity	Units	Unit Price	Amount	Units	Unit Price	Amount	Units	Unit Price	Amount
Mar-01	Beginning Inventory	100	$               50.00	$        5,000.00				100	$      50.00	$       5,000.00
Mar-05	Purchase	400	$               55.00	$      22,000.00				100	$      50.00	$       5,000.00
								400	$      55.00	$     22,000.00
Mar-09	Sales				400	$          55.00	$       22,000.00	80	$      50.00	$       4,000.00
					20	$          50.00	$         1,000.00
Mar-18	Purchase	120	$               60.00	$        7,200.00				80	$      50.00	$       4,000.00
								120	$      60.00	$       7,200.00
Mar-25	Purchase	200	$               62.00	$      12,400.00				80	$      50.00	$       4,000.00
								120	$      60.00	$       7,200.00
								200	$      62.00	$     12,400.00
Mar-29	Sales				160	$          62.00	$         9,920.00	80	$      50.00	$       4,000.00
								120	$      60.00	$       7,200.00
								40	$      62.00	$       2,480.00
	Total	820		$     46,600.00	580		$      32,920.00	240		$     13,680.00

(c) Weighted Average

	W. Avg	Cost of goods available for sale			Cost of Goods Sold			Ending Balance
Date	Activity	Units	Unit Price	Amount	Units	Unit Price	Amount	Units	Unit Price	Amount
Mar-01	Beginning Inventory	100	$               50.00	$        5,000.00				100	$      50.00	$       5,000.00
Mar-05	Purchase	400	$               55.00	$      22,000.00				100	$      50.00	$       5,000.00
								400	$      55.00	$     22,000.00
								500	$      54.00	$     27,000.00
Mar-09	Sales				420	$          54.00	$       22,680.00	80	$      54.00	$       4,320.00
Mar-18	Purchase	120	$               60.00	$        7,200.00				80	$      54.00	$       4,320.00
								120	$      60.00	$       7,200.00
								200	$      57.60	$     11,520.00
Mar-25	Purchase	200	$               62.00	$      12,400.00				200	$      57.60	$     11,520.00
								200	$      62.00	$     12,400.00
								400	$      59.80	$     23,920.00
Mar-29	Sales				160	$          59.80	$         9,568.00	240	$      59.80	$     14,352.00
	Total	820		$     46,600.00	580		$      32,248.00	240		$     14,352.00

(d) Sp. Identification