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: Cost assigned to ending inventory and cost of goods sold using FIFO method.
1.
Answer to Problem 4PSB
Cost of goods available for is $249,300 and number of units available for sale is 680
Explanation of Solution
Cost of goods available for sale and number of units available for sale is as follows:
Date | Particular | Units | Per unit cost | Total cost |
1st May | Opening inventory | 150 | 300 | 45000 |
6th May | Purchase | 350 | 350 | 122500 |
17th May | Purchase | 80 | 450 | 36000 |
25th May | purchase | 100 | 458 | 45800 |
Total | 680 | 249,300 |
Thus, cost of goods available for is $249,300 and number of units available for sale is 680
Thus the cost assigned to ending inventory under FIFO method is $88800.
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 calculate: Cost assigned to ending inventory and cost of goods sold using FIFO method.
2.
Answer to Problem 4PSB
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: Cost assigned to ending inventory and cost of goods sold using LIFO method.
3.
Answer to Problem 4PSB
Cost assigned to ending inventory under FIFO method is $88800, under LIFO method is $62500, using weighted average method is $75600, using specific identification method is $$74,500
Explanation of Solution
- Cost assigned under FIFO method:
- LIFO method:
Thus the cost assigned to ending inventory under FIFO method is $88800.
Thus the cost assigned to ending inventory under LIFO method is $62500.
- Calculating the assigned amount of ending inventory according to weighted average method:
- Cost assigned to total inventory using specific identification method:
Date | Particular | Unit | Cost per unit | Total | Balance inventory | ||
Units | Cost per unit | Total cost | |||||
1st May | Opening balance | 150 | 300 | 45000 | 150 | 300 | 45000 |
6th may | Purchase | 350 | 350 | 122500 | 500 | 335 | 167500 |
9th may | Sales | 180 | 335 | 60300 | 320 | 335 | 107200 |
17th may | Purchase | 80 | 450 | 3600 | 400 | 358 | 143200 |
25th may | Purchase | 100 | 458 | 45800 | 500 | 378 | 189000 |
30th may | Sales | 300 | 378 | 113400 | 200 | 378 | 75600 |
Thus, cost assigned to ending inventory using weighted average method is $75600
Using specific identification method closing inventory will consist
Particular | Units | Per unit ($) | Amount ($) |
Opening Inventory | 70 | 300 | 21000 |
6th May | 50 | 350 | 17500 |
17th May | 80 | 450 | 36000 |
Total | $74,500 |
Thus, cost assigned to ending inventory using specific identification method is $$74,500
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 earn by the company is cost assigned to ending inventory for the company A using FIFO,LIFO and weighted average and specific identification.
4.
Answer to Problem 4PSB
Gross using FIFO methods is $636000 , using LIFO method is $449200, using weighted average method is $460024, and specific identification method is $461200.
Explanation of Solution
Gross profit earn by the company:
Cost of Goods sold:
For FIFO method
For LIFO methods
For weighted average method:
For specific identification:
Particular | FIFO method | LIFO method | Weighted average method | Specific identification method |
Total Sales | $636000 | $636000 | $636000 | $636000 |
Cost of goods sold | $160500 | $186800 | $173700 | $174800 |
Total | $475,500 | $449200 | $462300 | $461200 |
Thus, gross using FIFO methods is $636000 , using LIFO method is $449200, using the weighted average method is $460024, and 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 earn by the company is cost assigned to ending inventory for the company A using FIFO,LIFO and weighted average and specific identification.
5.
Answer to Problem 4PSB
The manager will prefer FIFO method for costing inventory as gross profit is highest in 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 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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Chapter 5 Solutions
Loose Leaf for Financial Accounting: Information for Decisions
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