Chapter 5, Problem 1PSA

1.

Summary Introduction

Introduction:

Inventory is a record of finished goods of a company which they can sell to the customer, work in progress which can be transformed into finish goods and raw material which is a means of production. Inventory is also classified as a current asset in the balance sheet and it is valued by FIFO LIFO and weighted average method.

To calculate: The total cost of goods available for sale and the number of units available for sales.

Answer to Problem 1PSA

The total cost of goods available for sale is $249300 and the total number of goods available for sale is 680 units

Explanation of Solution

Cost of goods available for sales and the number of goods available for sales:

Date	Particular	Unit	Rate ($)	Total Cost ($)
1st March	Opening inventory	100	50	5,000
5th March	Purchases	400	55	22,000
18th March	Purchases	120	60	7,200
25st March	Purchases	200	62	12,400
Total		822		46,600

So, the total cost of goods available for sale is $846,600 and the total number of goods available for sale is 822 units

2.

Summary Introduction

Introduction:

Inventory is a record of finished goods of a company which they can sell to the customer, work in progress which can be transformed into finish goods and raw material which is a means of production. Inventory is also classified as a current asset in the balance sheet and it is valued by FIFO LIFO and weighted average method.

To compute: The number of unit in ending inventory for the company A.

Answer to Problem 1PSA

The number of units in ending inventory is 400 units.

Explanation of Solution

The number of units in closing inventory is as follows:

  $\begin{array}{l}\text{Closing Units= Opening Units+ Units purchased - units sold}\\ \text{=100+400+120+200-420-160=240}\end{array}$

The number of units in ending inventory is 240 units

3.

Summary Introduction

Introduction:

Inventory is a record of finished goods of a company which they can sell to the customer, work in progress which can be transformed into finish goods and raw material which is a means of production. Inventory is also classified as a current asset in the balance sheet and it is valued by FIFO LIFO and weighted average method.

To compute: The cost assigned to ending inventory for company A using FIFO, LIFO and weighted average and specific identification.

Answer to Problem 1PSA

Explanation of Solution

a. Cost assigned to ending inventory for the company A using FIFO :

Using FIFO method closing inventory of 240 units will consist:

  

Thus, the cost assigned to ending inventory is $18,400.

b. Calculating the assigned amount of ending inventory according to the LIFO method:

Using the LIFO method closing inventory of 240 units will consist

  

Thus, cost of assigned to ending inventory is $14,352

Calculating the assigned amount of ending inventory according to weighted-average method:

The weighted average cost is calculated as:

Particular	Cost of goods available for sale			Cost of goods sold			Ending inventory
	Unit	Per unit ($)	Total ($)	Units	Per unit	Total	Units	Per unit cost	Ending inventory
Beginning inventory	100	50	5,000				100	50	5,000
5th march Purchase	400	55	22,000				500	54	27,000
9th march Sale				420	54	22,680	80	54	43,20
18th march Purchase	120	60	7,200				200	58	11,520
25th march Purchase	200	62	12,400				400	59.8	23,920
29th march Sale				160	62	9,920	240	59.8	14,352
									$14,352

Thus, cost assigned to ending inventory $ 14352

Cost assigned to total inventory using specific identification method:

Using specific identification method closing inventory of 240 units will consist

  

Thus, cost assigned to ending inventory is $144060.

4.

Summary Introduction

Introduction:

Inventory is a record of finished goods of a company which they can sell to the customer, work in progress which can be transformed into finish goods and raw material which is a means of production. Inventory is also classified as a current asset in the balance sheet and it is valued by FIFO LIFO and weighted average method.

To compute: The gross profit earn by the company is cost assigned to ending inventory for the company A using FIFO,LIFO and weighted average and specific identification.

Answer to Problem 1PSA

Gross using FIFO methods is $46200 , using LIFO method is $45800, using weighted average method is $44956, and specific identification method is $46000.

Explanation of Solution

Particular	FIFO	LIFO	Specific identification.	weighted average
Cost of goods available for sale	46,600	46,600	46,600	46,600
Less: closing stock 240 units	14,800	13,680	14,060	14,352
Cost of goods sold	31,800	32,920	32,540	32,248

Gross profit earned by the company:

Particular	FIFO method	LIFO method	Weighted average method	Specific identification method
Total Sales	$50,900	$50,900	$50,900	$50,900
Less: Cost of goods sold	$31,800	32,920	32,540	32,248
Total	19100	17980	18360	18652

Thus, gross using FIFO methods is $19,100, using the LIFO method is $17,980, using the weighted average method is $18,360, and the specific identification method is $18,652.