Question

Problem 5-4AA Perpetual: Alternative cost flows LO P3 Montoure Company uses a perpetual inventory system. It entered into the following calendar-year purchases and sales transactions. Units Sold at Retail Units Acquired at Cost 660 units @ $60 per unit 330 units @ $57 per unit 110 units @ $45 per unit Activities Jan. 1 Beginning inventory Feb. 10 Purchase Mar. 13 Purchase Mar. 15 Sales Aug. 21 Purchase Sept. 5 Purchase Sept. 10 Sales Totals 715 units @ $70 per unit 160 units @ $65 per unit 570 units @ $61 per unit 730 units @ $70 per unit 1,445 units 1,830 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, (C) weighted average, and (d) specific identification. For specific identification, units sold consist of 660 units from beginning inventory, 230 from the February 10 purchase, 110 from the March 13 purchase, 110 from the August 21 purchase, and 335 from the September 5 purchase. (Round your average cost per unit to 2 decimal places.) 4. Compute gross profit earned by the company for each of the four costing methods. (Round your average cost per unit to 2 decimal places.)

Answer 1

Requirement 1.
Cost of Goods Available for sale	$108,530
Number of Units Available for sale	1830	Units
Workings:
	Cost of Goods Available for sale
	# of Units	Cost per unit	Cost of Goods Available for sale
Beginning Inventory	660	$60	$39,600
Purchases
Feb-10	330	$57	$18,810
Mar-13	110	$45	$4,950
Aug-21	160	$65	$10,400
Sep-05	570	$61	$34,770
Total	1830		$108,530

Requirement 2.
Number of Units in Ending Inventory	385	Units
	# of Units
Beginning Inventory	660
Purchases
Feb-10	330
Mar-13	110
Aug-21	160
Sep-05	570
Sales
Mar-15	715
Sep-10	730
Number of Units in Ending Inventory	385
* Ending Inventory = Beginning Inventory + Purchase - Sales

(a) FIFO	Cost of Goods Available for sale			Cost Of Goods Sold			Balance
	# of Units	Cost per unit	Cost of Goods Available for sale	# of Units sold	Cost per unit	Cost of Goods Sold	# of units in ending invetory	Cost per unit	Ending inventory
Beginning Inventory	660	$60	$39,600	660	$60	$39,600	0	$60	$0
Purchases
Feb-10	330	$57	$18,810	330	$57	$18,810	0	$57	$0
Mar-13	110	$45	$4,950	110	$45	$4,950	0	$45	$0
Aug-21	160	$65	$10,400	160	$65	$10,400	0	$65	$0
Sep-05	570	$61	$34,770	185	$61	$11,285	385	$61	$23,485
Total	1830		$108,530	1445		$85,045	385		$23,485
(b) LIFO	Cost of Goods Available for sale			Cost Of Goods Sold			Balance
	# of Units	Cost per unit	Cost of Goods Available for sale	# of Units sold	Cost per unit	Cost of Goods Sold	# of units in ending invetory	Cost per unit	Ending inventory
Beginning Inventory	660	$60	$39,600	275	$60	$16,500	385	$60	$23,100
Purchases
Feb-10	330	$57	$18,810	330	$57	$18,810	0	$57	$0
Mar-13	110	$45	$4,950	110	$45	$4,950	0	$45	$0
Aug-21	160	$65	$10,400	160	$65	$10,400	0	$65	$0
Sep-05	570	$61	$34,770	570	$61	$34,770	0	$61	$0
Total	1830		$108,530	1445		$85,430	385		$23,100
(c) Weighted Average	Cost of Goods Available for sale			Cost Of Goods Sold			Balance
	# of Units	Cost per unit	Cost of Goods Available for sale	# of Units sold	Cost per unit	Cost of Goods Sold	# of units in ending invetory	Cost per unit	Ending inventory
Beginning Inventory	660	$60	$39,600	0	$60	$0	660	$60	$39,600
Purchases
Feb-10	330	$57	$18,810	0	$57	$0	990	$59	$58,410
Mar-13	110	$45	$4,950	0	$45	$0	1100	$58	$63,360
Mar-15				715	$58	$41,184	385	$58	$22,176
Aug-21	160	$65	$10,400	0	$65	$0	545	$60	$32,576
Sep-05	570	$61	$34,770	0	$61	$0	1115	$60	$67,346
Sep-10				730	$60	$44,092	385	$60	$23,254
Total	1830		$108,530	1445		$85,276
(d) Specific Identification	Cost of Goods Available for sale			Cost Of Goods Sold			Balance
	# of Units	Cost per unit	Cost of Goods Available for sale	# of Units sold	Cost per unit	Cost of Goods Sold	# of units in ending invetory	Cost per unit	Ending inventory
Beginning Inventory	660	$60	$39,600	660	$60	$39,600	0	$60	$0
Purchases
Feb-10	330	$57	$18,810	230	$57	$13,110	100	$57	$5,700
Mar-13	110	$45	$4,950	110	$45	$4,950	0	$45	$0
Aug-21	160	$65	$10,400	110	$65	$7,150	50	$65	$3,250
Sep-05	570	$61	$34,770	335	$61	$20,435	235	$61	$14,335
Total	1830		$108,530	1445		$85,245	385		$23,285

Requirement 4.
	FIFO	LIFO	Weighted Average	Specific Identification
Sales	$101,150	$101,150	$101,150	$101,150
Less: Cost of Goods Sold	$85,045	$85,430	$85,276	$85,245
Gross Profit	$16,105	$15,720	$15,874	$15,905