Question

Stewart Co.'s beginning inventory and purchases during the year ended December 31, 2010, were as follows: Unit Cost $50.00 52.50 Total Cost Units 1,000 1,200 January 1 March 10 June 25 August 30 October 5 November 26 December 31 $ 50,000 Inventory Purchase Sold 800 units Purchase Sold 1,500 units Purchase Sold 1 63,000 800 55.00 44,0004 2,000 56.00 112,00 ,000 units Total 5,000 $269,000 Instructions Determine the cost of inventory on December 31, 2010, using the perpetual inven- tory system and each of the following inventory costing methods: a. first-in, first-out b. last-in, first-out 1. 2. Determine the cost of inventory on December 31, 2010, using the periodic inven tory system and each of the following inventory costing methods: a. first-in, first-out b. last-in, first-out c. average cost Appendix: Assume that during the fiscal year ended December 31, 2010, sales were 3. nd the estimated gross profit rate was 40%. Estimate the ending inven- tory at December 31, 2010, using the gross profit method.

Answer 1

Solution 1a:

Computation of ending inventory COGS under FIFO - Stewart Co
Date	Beginning Inventory			Purchase			Cost of Goods Sold			Ending Inventory
	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount
1-Jan	1000	$50.00	$50,000.00	0	$0.00	$0.00	0	$0.00	$0.00	1000	$50.00	$50,000.00
10-Mar	1000	$50.00	$50,000.00	1200	$52.50	$63,000.00	0	$0.00	$0.00	1000	$50.00	$50,000.00
										1200	$52.50	$63,000.00
25-Jun	1000	$50.00	$50,000.00	0	$0.00	$0.00	800	$50.00	$40,000.00	200	$50.00	$10,000.00
	1200	$52.50	$63,000.00							1200	$52.50	$63,000.00
30-Aug	200	$50.00	$10,000.00	800	$55.00	$44,000.00	0	$0.00	$0.00	200	$50.00	$10,000.00
	1200	$52.50	$63,000.00							1200	$52.50	$63,000.00
										800	$55.00	$44,000.00
5-Oct	200	$50.00	$10,000.00	0	$0.00	$0.00	200	$50.00	$10,000.00	700	$55.00	$38,500.00
	1200	$52.50	$63,000.00				1200	$52.50	$63,000.00
	800	$55.00	$44,000.00				100	$55.00	$5,500.00
26-Nov	700	$55.00	$38,500.00	2000	$56.00	$112,000.00	0	$0.00	$0.00	700	$55.00	$38,500.00
										2000	$56.00	$112,000.00
31-Dec	700	$55.00	$38,500.00	0	$0.00	$0.00	700	$55.00	$38,500.00	1700	$56.00	$95,200.00
	2000	$56.00	$112,000.00				300	$56.00	$16,800.00
Total							3300		$173,800.00	1700		$95,200.00

Solution 1b:

Computation of ending inventory COGS under LIFO - Stewart Co
Date	Beginning Inventory			Purchase			Cost of Goods Sold			Ending Inventory
	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount
1-Jan	1000	$50.00	$50,000.00	0	$0.00	$0.00	0	$0.00	$0.00	1000	$50.00	$50,000.00
10-Mar	1000	$50.00	$50,000.00	1200	$52.50	$63,000.00	0	$0.00	$0.00	1000	$50.00	$50,000.00
										1200	$52.50	$63,000.00
25-Jun	1000	$50.00	$50,000.00	0	$0.00	$0.00	800	$52.50	$42,000.00	1000	$50.00	$50,000.00
	1200	$52.50	$63,000.00							400	$52.50	$21,000.00
30-Aug	1000	$50.00	$50,000.00	800	$55.00	$44,000.00	0		$0.00	1000	$50.00	$50,000.00
	400	$52.50	$21,000.00							400	$52.50	$21,000.00
										800	$55.00	$44,000.00
5-Oct	1000	$50.00	$50,000.00	0	$0.00	$0.00	800	$55.00	$44,000.00	700	$50.00	$35,000.00
	400	$52.50	$21,000.00				400	$52.50	$21,000.00
	800	$55.00	$44,000.00				300	$50.00	$15,000.00
26-Nov	700	$50.00	$35,000.00	2000	$56.00	$112,000.00	0	$0.00	$0.00	700	$50.00	$35,000.00
										2000	$56.00	$112,000.00
31-Dec	700	$50.00	$35,000.00	0	$0.00	$0.00	1000	$56.00	$56,000.00	700	$50.00	$35,000.00
	2000	$56.00	$112,000.00							1000	$56.00	$56,000.00
Total							3300		$178,000.00	1700		$91,000.00

Solution 2a:

FIFO (Periodic)
Particulars	Units	Cost per unit	Total
Beginning Inventory	1000	$50.00	$50,000.00
Purchases:
10-Mar	1200	$52.50	$63,000.00
30-Aug	800	$55.00	$44,000.00
26-Nov	2000	$56.00	$112,000.00
Total Purchases	4000		$219,000.00
Goods available for Sale	5000		$269,000.00
Cost of goods sold:
Units from beginning inventory	1000	$50.00	$50,000.00
Units from Mar 10 purchase	1200	$52.50	$63,000.00
Units from Aug 30 purchase	800	$55.00	$44,000.00
Units from Nov 26 purchase	300	$56.00	$16,800.00
Total cost of goods sold	3300		$173,800.00
Ending Inventory	1700		$95,200.00

Solution 2b:

LIFO (Periodic)
Particulars	Units	Cost per unit	Total
Beginning Inventory	1000	$50.00	$50,000.00
Purchases:
10-Mar	1200	$52.50	$63,000.00
30-Aug	800	$55.00	$44,000.00
26-Nov	2000	$56.00	$112,000.00
Total Purchases	4000		$219,000.00
Goods available for Sale	5000		$269,000.00
Cost of goods sold:
Units from beginning inventory	0	$50.00	$0.00
Units from Mar 10 purchase	500	$52.50	$26,250.00
Units from Aug 30 purchase	800	$55.00	$44,000.00
Units from Nov 26 purchase	2000	$56.00	$112,000.00
Total cost of goods sold	3300		$182,250.00
Ending Inventory	1700		$86,750.00

Solution 2c:

Average Cost (Periodic)
Particulars	Units	Cost per unit	Total
Beginning Inventory	1000	$50.00	$50,000.00
Purchases:
10-Mar	1200	$52.50	$63,000.00
30-Aug	800	$55.00	$44,000.00
26-Nov	2000	$56.00	$112,000.00
Total Purchases	4000		$219,000.00
Goods available for Sale	5000	$53.80	$269,000.00
Cost of goods sold	3300	$53.80	$177,540
Ending Inventory	1700		$91,460

Solution 3:

Sales = $290,000

Gross profit rate = 40%

Gross profit = $290,000*40% = $116,000

Cost of goods sold = $290,000 - $116,000 = $174,000

Cost of goods available for sale = $269,000

Ending inventory using Gross profit method = Cost of goods available for sale - Cost of goods sold

= $269,000 - $174,000 = $95,000

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