Mojo Industries tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the accounting period, January 31. The inventory’s selling price is $9 per unit. Transactions Unit Cost Units Total Cost Inventory, January 1 $ 2.50 260 $ 650 Sale, January 10 (200) Purchase, January 12 3.00 310 930 Sale, January 17 (150) Purchase, January 26 4.00 55 220 Required: Compute the amount of goods available for sale, ending inventory, and cost of goods sold at January 31 under each of the following inventory costing methods: a. Weighted average cost. b. First-in, first-out. c. Last-in, first-out. d. Specific identification, assuming that the January 10 sale was from the beginning inventory and the January 17 sale was from the January 12 purchase. 2-a. Of the four methods, which will result in the highest gross profit? Weighted average cost first in, first out last in, first out specific identification 2-b. Of the four methods, which will result in the lowest income taxes? Weighted average cost first in, first out last in, first out specific identification

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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PB7-1 (Algo) Analyzing the Effects of Four Alternative Inventory Methods in a Periodic Inventory System [LO 7-3]

Mojo Industries tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the accounting period, January 31. The inventory’s selling price is $9 per unit.

Transactions	Unit Cost	Units	Total Cost
Inventory, January 1	$ 2.50	260	$ 650
Sale, January 10		(200)
Purchase, January 12	3.00	310	930
Sale, January 17		(150)
Purchase, January 26	4.00	55	220

Required:

Compute the amount of goods available for sale, ending inventory, and cost of goods sold at January 31 under each of the following inventory costing methods:
a. Weighted average cost.
b. First-in, first-out.
c. Last-in, first-out.
d. Specific identification, assuming that the January 10 sale was from the beginning inventory and the January 17 sale was from the January 12 purchase.

2-a. Of the four methods, which will result in the highest gross profit?

Weighted average cost

first in, first out

last in, first out

specific identification

2-b. Of the four methods, which will result in the lowest income taxes?

Weighted average cost

first in, first out

last in, first out

specific identification

Unit
Transactions
Cost
Units
Total Cost
$ 2.50
$ 650
Inventory, January 1
Sale, January 10
Purchase, January 12
Sale, January 17
Purchase, January 26
260
(200)
3.00
310
930
(150)
4.00
55
220
Required:
1. Compute the amount of goods available for sale, ending inventory, and cost of goods sold at January 31 under each of the following
inventory costing methods:
a. Weighted average cost.
b. First-in, first-out.
c. Last-in, first-out.
d. Specific identification, assuming that the January 10 sale was from the beginning inventory and the January 17 sale was from the
January 12 purchase.
2-a. Of the four methods, which will result in the highest gross profit?
2-b. Of the four methods, which will result in the lowest income taxes?
Complete this question by entering your answers in the tabs below.
Req 1
Req 2A
Req 2B
Compute the amount of goods available for sale, ending inventory, and cost of goods sold at January 31 under each of the
inventory costing methods. (Round your intermediate calculations to 2 decimal places and final answers to the nearest dollar
amount.)
Amount of Goods
Ending Inventory
Cost of Goods
Sold
Available for Sale
a. Weighted average cost
b. First-in, first-out
c. Last-in, first-out:
d. Specific identification

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