
Concept explainers
a.
Ascertain the cost of goods sold and the ending inventory cost at December 31, 2012 under first-in first out method.
a.

Explanation of Solution
Periodic inventory system: The method or system of recording the transactions related to inventory occasionally or periodically are referred to as periodic inventory system.
First-in-First-Out (FIFO): In this method, items purchased initially are sold first. So, the value of the ending inventory consist the recent cost for the remaining unsold items.
Ascertain the cost of goods sold and the ending inventory cost for the month of April under first-in first out method as follows:
Ending inventory:
Calculation of Cost of Ending Inventory | |||
Details | Number of Units | Rate per Unit ($) | Total Cost ($) |
November 23 | 1,200 | 55 | 66,000 |
September 19 | 800 | 50 | 40,000 |
March 8 | 200 | 44 | 8,800 |
Ending Inventory | 2,200 | 114,800 |
Table (1)
Therefore, the ending inventory of Company G under first-in first out method is $114,800.
Calculate the Cost of Goods Sold:
Here,
Goods available for sale is $342,000 (Refer Table 2)
Ending inventory is $114,800 (Refer Table 1)
Therefore, the cost of goods sold of Company G under first-in first out under method is $227,200.
Working note:
Calculate the total cost and goods available for sales
Calculation of Goods Available for Sales | |||
Details | Number of Units | Rate per Unit ($) | Total Cost ($) |
Beginning balance | 2,600 | 40 | 104,000 |
Add: Purchases | |||
March 8 | 3,000 | 44 | 132,000 |
September 19 | 800 | 50 | 40,000 |
November 23 | 1,200 | 55 | 66,000 |
Total Goods available for Sale | 7,600 | 342,000 | |
Less: Sales: | |||
January 3 | 1,600 | ||
June 13 | 2,000 | ||
December 23 | 1,800 | ||
Ending Inventory | 2,200 |
Table (2)
b.
Ascertain the cost of goods sold and the ending inventory cost at December 31, 2012 under last-in first out method.
b.

Explanation of Solution
Last-in-First-Out (LIFO): In this method, items purchased recently are sold first. So, the value of the ending inventory consist the initial cost for the remaining unsold items.
Ascertain the cost of goods sold and the ending inventory cost for the month of April under last-in first out method as follows:
Ending inventory:
Calculation of Cost of Ending Inventory | |||
Details | Number of Units | Rate per Unit ($) | Total Cost ($) |
Beginning Balance | 2,200 | 40 | 88,000 |
Ending Inventory | 2,200 | 88,000 |
Table (3)
Therefore, the ending inventory of Company G under last-in first out method is $88,000.
Calculate the Cost of Goods Sold:
Here,
Goods available for sale is $342,000 (Refer Table 2)
Ending inventory is $88,000 (Refer Table 3)
Therefore, the cost of goods sold of Company G under first-in first out under method is $254,000.
c.
Ascertain the cost of goods sold and the ending inventory cost for the month of April under weighted average cost method.
c.

Explanation of Solution
Weighted-average Cost Method: In this method, the inventories are priced at the average rate of goods available for sales.
Ascertain the cost of goods sold and the ending inventory cost for the month of April under weighted average cost method as follows:
Ending inventory:
Here,
Weighted- average cost per unit is $45 (1)
Number of units in ending inventory is 2,000 units (Refer Table 2)
Therefore, the ending inventory of Company G under weighed average cost method is $99,000.
Calculate the Cost of Goods Sold:
Goods available for sale is $342,000 (Refer Table 1)
Ending inventory is $99,000
Therefore, the cost of goods sold of Company G under weighed average cost method is $243,000.
Working note:
Calculate weighted average cost per unit
Here,
Total cost of goods available for sale is $342,000 (Refer Table 2)
Total units of goods available for sale is 7,600 units (Refer Table 2)
d.
Identify the inventory cost method that is more appropriate if Company G sells quickly obsolete items.
d.

Explanation of Solution
Identify the inventory cost method that is more appropriate if Company G sells quickly obsolete items as follows:
1. Reflect the likely goods flow through the business:
If the goods flow is to be reflected through the business, use FIFO method because the perishable goods should be used before they time-out, expire, or become old (editions)
2. Minimize income tax for the period:
If the income tax is to be minimized, use LIFO method because cost of goods sold is higher and eventually lower net income resulting in a lower income tax, hence, tax savings are possible.
3. Report the largest amount of net income for the period:
If the company wants to report higher net income, FIFO method should be used because high price products are used later under the FIFO method. The low price or older price results in the low cost of goods sold. Low cost of goods sold results in high net income.
Want to see more full solutions like this?
Chapter 6 Solutions
Financial Accounting for Undergraduates
- I am looking for the correct answer to this accounting question with appropriate explanations.arrow_forwardI am searching for the accurate solution to this financial accounting problem with the right approach.arrow_forwardI am looking for the correct answer to this general accounting problem using valid accounting standards.arrow_forward
- Hello tutor please given General accounting question answer do fast and properly explain all answerarrow_forwardChalmers Corporation operates in multiple areas of the globe, and relatively large price changes are common. Presently, the company sells 110,200 units for $50 per unit. The variable production costs are $20, and fixed costs amount to $2,079,500. Production engineers have advised management that they expect unit labor costs to rise by 10 percent and unit materials costs to rise by 15 percent in the coming year. Of the $20 variable costs, 25 percent are from labor and 50 percent are from materials. Variable overhead costs are expected to increase by 20 percent. Sales prices cannot increase more than 12 percent. It is also expected that fixed costs will rise by 10 percent as a result of increased taxes and other miscellaneous fixed charges. The company wishes to maintain the same level of profit in real dollar terms. It is expected that to accomplish this objective, profits must increase by 8 percent during the year. Required: Compute the volume in units and the dollar sales level…arrow_forwardAfter describing a threat/risk in either the revenue cycle (i.e., in sales and cash collection activities) or the expenditure cycle (i.e., in purchases or cash disbursement activities). What are specific internal controls that might be applied to mitigate each of the threats we've identified?arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





