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Item 3

Item 3 Part 3 of 4 2.85 points

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Warnerwoods Company uses a perpetual inventory system. It entered into the following purchases and sales transactions for March.

Date

Activities

Units Acquired at Cost

Units Sold at Retail

Mar.

1

Beginning inventory

210

units

@ $53.20 per unit

Mar.

5

Purchase

280

units

@ $58.20 per unit

Mar.

9

Sales

370

units

@ $88.20 per unit

Mar.

18

Purchase

140

units

@ $63.20 per unit

Mar.

25

Purchase

260

units

@ $65.20 per unit

Mar.

29

Sales

240

units

@ $98.20 per unit

Totals

890

units

610

units

3. Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification. For specific identification, the March 9 sale consisted of 120 units from beginning inventory and 250 units from the March 5 purchase; the March 29 sale consisted of 100 units from the March 18 purchase and 140 units from the March 25 purchase.

Compute the cost assigned to ending inventory using FIFO. Perpetual FIFO: Goods Purchased # of Cost per # of units units unit sold Cost of Goods Sold Cost percutor er Cost of Goods Sold Date Inventory Balance # of units Cost per Inventory unit Balance 210 @ $53.20 = $ 11,172.00 March 1 March 5 March 9 March 18 March 25 March 29 Totals < Perpetual FIFO Perpetual LIFO >

Answer 1

FIFO: Under the FIFO method, it is assumed that the goods purchased first are the goods sold first. So the ending inventory would represent the goods purchased later in point of time.
LIFO: Under the LIFO method, it is assumed that the goods purchased last are the goods sold first. So the ending inventory would represent the goods which are purchased first in point of time.
Average cost: Under the average cost method, average cost per unit is found for units available for sale and the average cost arrived is used to calculate ending inventory and cost of goods sold.

FIFO Date Mar, 1 Goods Purchased #of Units Cost per unit Cost of Goods Sold cost per unit # of Units sold Inventory Balance Cost per unit Inventory balance $ 53.20 11,172.00 $ 53.20 11,172.00 $ 58.20 16,296.00 280 @ $ Cost of goods sold # of Units 210 @ 210 @ 280 @ 11,172 9,312 @ 58.20 Mar, 5 Mar, 9 210 @ 160 @ $ $ 53.20 = 58.20 = $ $ Mar, 18 140 @ $ 63.20 140 @ 120 @ 140 @ 58.20 58.20 63.20 58.20 63.20 65.20 6,984.00 6,984.00 8,848.00 6,984.00 8,848.00 16,952.00 $ = 260 @ $ 65.20 $ Mar, 25 Mar, 29 120 @ 120 @ $ $ 58.20 = 63.20 = $ $ 6,984 7,584 20 @ 260 @ 280 $ $ 63.20 65.20 1,264.00 Ending Inventory 16,952.00 Ending Inventory 18,216.00 680 610 35,052

UFO Date Mar, 1 Goods Purchased #of Units Cost per unit Cost of Goods Sold Cost per unit # of Units sold Cost of goods sold # of Units 210 210 Inventory Balance Cost per unit Inventory balance $ 53.20 11,172.00 $ 53.20 11,172.00 58.20 16,296.00 53.20 6,384.00 280 @ $ 58.20 1$ 50 Mar, 5 Mar, 9 90 @ 280 @ $ $ 53.20 = 58.20 = $ 4,788 16,296 Mar, 18 140 @ $ 63.20 120 @ 140 @ 120 @ 140 @ 260 @ 120 @ 53.20 63.20 53.20 63.20 65.20 53.20 63.20 65.20 260 @ Mar, 25 $ uuuuuuuu 65.20 1111111111111111 6,384.00 8,848.00 6,384.00 8,848.00 16,952.00 6,384.00 Ending Inventory 8,848.00 Ending Inventory 1,304.00 Ending Inventory 16,536.00 Mar, 29 240 @ $ 65.20 = $ 15,648 36,732 680 610 280

Weighted Average Date Mar, 1 Mar, 5 Mar, 9 Goods Purchased Cost of Goods Sold # of Units Cost per unit #of Units sold cost per unit Cost of goods sold # of Units 210 @ 210 @ 280 @ $ 58.20 280 @ Weighted Average cost = Total inventory balance $ 27,468 /Total units 490 370 @ $ 56.06 = $ 20,741 120 @ 120 @ 140 @ $ 63.20 140 @ Weighted Average cost = Total inventory balance $ 15,574.86 /Total units 260 260 @ 260 @ $ 65.20 260 @ Weighted Average cost = Total inventory balance $ 32,526.86 / Total units 520 520 @ 240 @ $ 62.55 = 15,012 280 @ 680 610 35,754 280 Inventory Balance Cost per unit Inventory balance $ 53.20 11,172.00 $ 53.20 11,172.00 $ 58.20 16,296.00 56.06 27,468.00 $ 56.06 6,726.86 $ 56.06 6,726.86 $ 63.20 8,848.00 59.90 15,574.86 $ $ 59.90 15,574.86 $ 65.20 16,952.00 $ 62.55 32,526.86 $ 62.55 = 17,514.46 Ending Inventory 17,514.46 Mar, 18 Mar, 25 Mar, 29

Specific identificati Date Mar, 1 Goods Purchased #of Units Cost per unit Cost of Goods Sold Cost per unit # of Units sold Cost of goods sold # of Units $ 58.20 120 @ 250 @ $ $ 53.20 = 58.20 = $ 6,384 14,550 is as is ses $ 63.20 Mar, 5 280 @ Mar, 9, out of beginning inventory out Mar, 5 purchase Mar, 1 Mar, 5 Mar, 18 140 @ Mar, 1 Mar, 5 Mar, 18 Mar, 25 260 @ Mar, 1 Mar, 5 Mar, 29, out of Mar, 18 purchase Mar, 29 out of Mar, 25 purchase 680 Inventory Balance Cost per unit Inventory balance 53.20 11,172 $ 53.20 11,172 58.20 16,296 4,788 1,746 4,788 58.20 = 1,746 63.20 = 8,848 4,788 1,746 8,848 16,952 4,788 Ending Inventory 58.20 = 1,746 Ending Inventory 63.20 = 2,528 Ending Inventory 65.20 7,824 Ending Inventory 16,886 IL LLLLLLL LLLLLLL 58.20 140 @ 260 @ $ 65.20 is eses is as es as ass $ = $ 100 @ 140 @ 63.20 65.20 $ = $ $ 6,320 9,128 36,382 610 280

Answer 2

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