Answered: (a) Assume that Whispering Diamonds…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Transcribed Image Text:Problem 6-06 You have the following information for Whispering Diamonds. Whispering Diamonds uses the periodic method of accounting for its inventory transactions. Whispering only carries one brand and size of diamonds all are identical. Each batch of diamonds purchased is carefully coded and marked with its purchase cost. March 1 Beginning inventory 150 diamonds at a cost of €308 per diamond. March 3 Purchased 200 diamonds at a cost of €350 each. March 5 Sold 184 diamonds for €600 each. March 10 Purchased 350 diamonds at a cost of €384 each. March 25 Sold 400 diamonds for €650 each. (a) Assume that Whispering Diamonds uses the specific identification cost flow method. (1) Demonstrate how Whispering Diamonds could maximize its gross profit for the month by specifically selecting which diamonds to sell on March 5 and March 25. To maximize gross profit, Whispering Diamonds should sell the diamonds with the (2) Demonstrate how Whispering Diamonds could minimize its gross profit for the month by selecting which diamonds to sell on March 5 and March 25. To minimize gross profit, Whispering Diamonds should sell the diamonds with the (b)Assume that Whispering Diamonds uses the FIFO cost flow assumption. Calculate cost of goods sold. How much gross profit would Whispering Diamonds report under this cost flow assumption? Cost of goods sold Gross profit € (c) Assume that Whispering Diamonds uses the average-cost cost flow assumption. Calculate cost of goods sold. How much gross profit would the company report under this cost flow assumption? (Round per unit cost to 3 decimal places, e.g. 15.125 and final answers to 0 decimal places, e.g. 125.) Cost of goods sold Gross profit €

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Exercise 6-16
Swifty's Boards sells a snowboard, Xpert, that is popular with snowboard
enthusiasts. Information relating to Swifty's purchases of Xpert
snowboards during September is shown below. During the same month,
121 Xpert snowboards were sold. Swifty's uses a perpetual inventory
system.
Date Explanation Units Unit Cost Total Cost
Sept. 1
Inventory 23 HK$814 HK$18,722
Sept. 12
Purchases
45
Sept. 19 Purchases.
20
Sept. 26 Purchases
44
Totals
132
Date
Sept. 5 Sale
Sept. 16 Sale
Sept. 29 Sale
Units Unit Price Total Cost
12 HK$1,672 HK$20,064
50
59
Totals 121
856
874
882
1,706
1,756
Ending Inventory FIFO
38,520
17,480
38,808
HK$113,530
Part 1
Compute ending inventory at September 30 using FIFO and moving-
average cost. (Round per unit cost to 2 decimal places, e.g. 15.25 and
final answers to 0 decimal places, e.g. 125.)
FIFO
MOVING-AVERAGE COST
HK$
Choose your answer here
Part 4
85,300
103,604
HK$208,968
The ending inventory HKS
Part 2
Compare ending inventory using a perpetual inventory system to ending
inventory using a periodic inventory system. (Round per unit cost to 2
decimal places, e.g. 15.25 and final answers to 0 decimal places, e.g.
125.)
Periodic
HK$
HK$
Perpetual
HK$
HK$
Ending Inventory Average
Part 3
Which inventory cost flow method (FIFO, moving-average cost) gives the
same ending inventory value under both periodic and perpetual?
yields the same ending inventory value.
Which method gives different ending inventory values?
Choose your answer here
yields different ending inventory values.

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