Question

Problem Set A connect LO8-1 PROBLEM 8.1A Four Methods of Inventory Valuation On January 15, 2015, Sports World sold 1,000 Ace-5 fishing reels to Angler's we Immediately prior to this sale, Sports World perpetual inventory records for Ace-5 reel the following cost layers: let's Watch -5 reels in Purchase Date Quantity Unit Cost Total Dec. 12, 2014 Jan. 9, 2015 Total on hand .... $29 600 900 1,500 32 $17.900 28.80 $46.2010 Instructions Note: We present this problem in the normal sequence of the accounting cycle that is, jou entries before ledger entries. However, you may find it helpful to work part b first. a. Prepare a separate journal entry to record the cost of goods sold relating to the January 15 of 1,000 Ace-5 reels, assuming that Sports World uses: 1. Specific identification (500 of the units sold were purchased on December 12, and the remaining 500 were purchased on January 9). 2. Average cost. 3. FIFO. 4. LIFO.

Answer 1

a. Specific Identification Method

	Cost of Goods Available for sale			Cost of Goods Sold			Ending Inventory
Date	No of Units	Cost per unit	Cost of Goods Available for sale	No of Units	Cost per unit	Cost of Goods Sold	No of units	Cost per unit	Ending Inventory
Dec-12	600	$          29	$                      17,400	500	$                  29	$             14,500	100	$               29	$         2,900
Jan-09	900	$          32	$                      28,800	500	$                  32	$             16,000	400	$               32	$      12,800
Total	1500		$                      46,200	1000		$             30,500	500		$      15,700

Date	Account Titles	Debit	Credit
Jan-15	Cost of Goods Sold	$         30,500
	Inventory		$         30,500

b. Average Cost Method
Average Cost per unit = $46200 / 1500 = $30.80 per unit

Cost of Goods Sold = 1000 x $30.80 = $30800

Date	Account Titles	Debit	Credit
Jan-15	Cost of Goods Sold	$         30,800
	Inventory		$         30,800

c.FIFO

	Cost of Goods Available for sale			Cost of Goods Sold			Ending Inventory
Date	No of Units	Cost per unit	Cost of Goods Available for sale	No of Units	Cost per unit	Cost of Goods Sold	No of units	Cost per unit	Ending Inventory
Dec-12	600	$          29	$                      17,400	600	$                  29	$             17,400	0	$               29	$                -
Jan-09	900	$          32	$                      28,800	400	$                  32	$             12,800	500	$               32	$      16,000
Total	1500		$                      46,200	1000		$             30,200	500		$      16,000

Date	Account Titles	Debit	Credit
Jan-15	Cost of Goods Sold	$         30,200
	Inventory		$         30,200

d. LIFO

	Cost of Goods Available for sale			Cost of Goods Sold			Ending Inventory
Date	No of Units	Cost per unit	Cost of Goods Available for sale	No of Units	Cost per unit	Cost of Goods Sold	No of units	Cost per unit	Ending Inventory
Dec-12	600	$          29	$                      17,400	100	$                  29	$                2,900	500	$               29	$      14,500
Jan-09	900	$          32	$                      28,800	900	$                  32	$             28,800	0	$               32	$                -
Total	1500		$                      46,200	1000		$             31,700	500		$      14,500

Date	Account Titles	Debit	Credit
Jan-15	Cost of Goods Sold	$         31,700
	Inventory		$         31,700