Concept explainers
1.
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
To calculate: The total cost of goods available for sale and the number of units available for sales.
1.

Answer to Problem 3PSB
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 May | Opening inventory | 150 | 300 | 45000 |
6thMay | Purchases | 350 | 350 | 122500 |
17th May | Purchases | 80 | 450 | 36000 |
25th May | Purchases | 100 | 458 | 45800 |
Total | 680 | 249,300 |
So, the total cost of goods available for sale is $249300 and the total number of goods available for sale is 680 units
2.
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.
2.

Answer to Problem 3PSB
The number of units in ending inventory is 200 units.
Explanation of Solution
The number of units in closing inventory is as follows:
The number of units in ending inventory is 200 units
3.
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 the company A using FIFO,LIFO and weighted average and specific identification.
3.

Answer to Problem 3PSB
Explanation of Solution
- Cost assigned to ending inventory for the company A using FIFO :
- Calculating the assigned amount of ending inventory according to LIFO method:
- Calculating the assigned amount of ending inventory according to weighted average method:
- Cost assigned to total inventory using specific identification method:
Using FIFO method closing inventory of 200 units will consist:
Particular | Units | Per unit ($) | Amount ($) |
6th May | 20 | 350 | 7000 |
17th May | 80 | 450 | 36000 |
25th May | 100 | 458 | 45800 |
Total | 88,800 |
Thus, cost assigned to ending inventory is $88,800 and cost of goods sold is $160,500 using FIFO method is $88,800.
Using LIFO method closing inventory of 200 units will consist
Particular | Units | Per unit ($) | Amount ($) |
Opening Inventory | 150 | 300 | 45000 |
6th May | 50 | 350 | 17500 |
Total | $62,500 |
Thus, cost of assigned to ending inventory is $62,500 cost of goods sold $186,800 using LIFO method.
Weighted average cost is calculated as:
The total cost 200 units are:
Thus, cost assigned to ending inventory $ 73324 and cost of goods sold is $175,976 using weighted average method.
Using specific identification method closing inventory of 200 units will consist
Particular | Units | Per unit ($) | Amount ($) |
Opening Inventory | 70 | 300 | 21000 |
6th May | 50 | 350 | 17500 |
17th May | 80 | 450 | 36000 |
Total | $75,500 |
Thus, cost assigned to ending inventory is $75,500 and cost of goods sold is $174,800 using specific identification method.
4.
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 earned by the company is the cost assigned to ending inventory for company A using FIFO, LIFO and weighted average and specific identification.
4.

Answer to Problem 3PSB
Gross using FIFO methods is $636000 , using the LIFO method is $449200, using the weighted average method is $460024, and specific identification method is $461200.
Explanation of Solution
Gross profit earn by the company:
Particular | FIFO method | LIFO method | Weighted average method | Specific identification method |
Total Sales | $636000 | $636000 | $636000 | $636000 |
Cost of goods sold | $160500 | $186800 | $175976 | $174800 |
Total | $475,500 | $449200 | $460024 | $461200 |
Thus, gross using FIFO methods is $636000 , using the LIFO method is $449200, using the weighted average method is $460024, and the specific identification method is $461200.
5.
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 earned by the company is the cost assigned to ending inventory for company A using FIFO, LIFO and weighted average and specific identification.
5.

Answer to Problem 3PSB
The manager will prefer the FIFO method for costing inventory as gross profit is highest in the FIFO method so using this method manager will earn more bonuses.
Explanation of Solution
FIFO method yield $475,500 gross profit which highest among other methods. So, the manager will prefer the FIFO method for costing inventory as gross profit is highest in the FIFO method so using this method manager will earn more bonuses.
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