Question

Exercise 6-50 Inventory Costing Methods Crandall Distributors uses a perpetual inventory system and has the following data available for inventory, purchases, and sales for a recent year: Sale Price (per unit) Activity Units Purchase Price (per unit) $7.10 7.20 110 Beginning inventory Purchase 1, Jan. 18 Sale 1 $12.00 12.00 Sale 2 7.50 Purchase 2, Mar. 10 Sale 3 Sale 4 Purchase 3, Sept. 30 12.00 12.50 7.70 Sale 5 12.50 Required: 1. Compute the cost of ending inventory and the cost of goods sold using the specific identification method. Assume the ending inventory is made up of 40 units from beginning inventory, 30 units from Purchase 1, 80 units from Purchase 2, and 40 units from Purchase 3. Cost of ending inventory s Cost of goods sold 2. Compute the cost of ending inventory and cost of goods sold using the FIFO inventory costing method. Cost of ending inventory s Cost of goods sold 3. Compute the cost of ending inventory and cost of goods sold using the LIFO inventory costing method. Cost of ending inventory s Cost of goods sold 4. Compute the cost of ending inventory and cost of goods sold using the average cost inventory costing method. (Note: Use four decimal places for per-unit calculations and round all other numbers to the nearest dollar.) Cost of ending inventory Cost of goods sold

Answer 1

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1. Using Specific Identification Method Cost of Inventory Cost of Goods Sold 1,408 10,384 Sales Ending Inventory Activity Beginning Units Cost of Goods Sold Total Purchase Cost Total Units 7.10 7.10 70 497 40 284 Purchase Jan 1 545 7.20 3,924 30 7.20 216 Purchase Mar 10 7,50 4,500 600 80 7.50 600 Purchase Sep 30 7.70 190 7,70 1,463 40 308 Total 1,405 7,41 7.39 10,384 190 1,408

COGS From COGS From Opening 110*7.1 + Pur Jan 1 270 7.2. 2. Using FIFO Method Pur Jn 1 225*7.2 Cost of Inventory Cost of Goods Sold 1,463 10,329 Endinginventory Purchases Sales Opening Balance Cost of Goods Purchase Total Cost of Goods Sold Total Purchase Cost Total Sold Total Activity Units Units Units Units Cost FEEPECUEE H 1/G J-A+D4G K=L/J A Prev J B Prev K C Prev L F D*E L C+F+ -G H D G Beginning Purchase Jan 1 Sale 1 110 7.10 781 110 7.10 781 7.20 4,140 110 7.10 781 575 685 7.18 4,921 4,921 7.17 7.20 2,196 685 7.18 380 2,725 305 Sale 2 1,620 7.20 305 7.20 2,196 225 80 7.20 576 Purchase Mar 10 80 7.20 576 680 7.50 5,100 760 7,47 5,676 Sale 3 2,001 2,175 7,41 490 760 7.47 5,676 270 7.50 3,675 - Sale 4 Purchase Sep 30 3,675 7.50 490 7.50 290 200 7.50 1,500 1,500 7.70 430 3,271 200 7.50 230 1,771 7.61 Purchase Sep 30 5.53 3,271 7,70 430 7.61 240 1,808 190 1,463 1,405 Total 10,329 1,485 7.41 11,011 7.35 COGS From COGS From COGS From Pur Mar 10 290*7.5 Pur Mar 10 200*7.5 Pur Sep 30 40*7.7 Pur Jan 1 80*7.2 Pur Mar 10 190*7.5

2. Using LIFO Method COGS From COGS From Pur Jan 1 380*7.2 Pur Jn 1 1957.2 Opening 30 *7.1 Cost of Inventory Cost of Goods Sold 1,393 10,399 Ending Inwentory Purchases Sales Opening Balance Cost of Púrchase Cost Goods Cost of Goods Sold Total Purchase Cost Total Sold Total Units Total Activity Units Units Units H 1/G F-D*E J-A+D+G K=L/J C Prev L L C+F+ A Prev J B J-G*H Prev K D E G Beginning Purchase Jan 1 Sale 1 110 110 7.10 781 7.10 781 110 7.10 7.18 781 575 7.20 4,140 685 4,921 7.18 685 4,921 380 7.20 2,736 305 7.16 2,185 Sale 2 Purchase Mar 10 7.16 305 2,185 225 7.19 1,617 80 7.10 568 7.10 568 7.50 80 680 5,100 760 7.46 5,668 Sale 3 Sale 4 2,025 2,175 760 7,46 270 5,668 7.50 490 7,43 3,643 - 490 7.43 3,643 290 7.50 200 7.34 1,468 Purchase Sep 30 7.34 7.53 200 1,468 230 7.70 1,771 430 3,239 Purchase Sep 30 240 1,846 190 430 7.53 3,239 7.69 7.33 1,393 Total 10,399 1,485 7.41 11,011 1,405 7.40 COGS From COGS From COGS From Pur Mar 10 - 270*7.5 Pur Mar 10 290*7.5 Pur Sep 30 230*7.7 Pur Mar 10 10*7.5

2. Using Weighted Average Method Cost of Inventory 1,405 Cost of Goods Sold 10,387 Purchase and Inventory Total Activity |Beginning Purchase Jan 1 Price Units 7.10 110 781 575 7.20 4,140 Purchase Mar 10 680 7.50 5,100 Purchase Sep 30 230 7.70 1,771 Total 1,595 7.39 11,792 Less: Sales 1,405 7.39 10,387 Closing Inventory 190 7.39 1,405