Loose Leaf for Fundamental Accounting Principles
23rd Edition
ISBN: 9781259687709
Author: John J Wild, Ken Shaw Accounting Professor, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
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Chapter 6, Problem 7E
To determine
Concept Introduction:
Periodic Inventory System: The periodic inventory system records and updates the inventory at the end of a particular period. The inventory balance is not updated after each transaction and it is updated periodically.
Methods of
• Specific identification method: Under this method the cost of goods sold and ending inventory units are identifiable and the cost is calculated accurately for each unit sold and in the inventory.
• Weighted Average method: Under this method, the cost per unit of the inventory is calculated as weighted average cost per unit and the cost of goods sold and inventory is calculated with the help of weighted average cost per unit.
• FIFO method: FIFO Stands for First In First Out. Under this method, the units purchased first are assumed to be sold first and cost of goods sold is calculated accordingly. The ending inventory in the method includes the latest units purchased.
• LIFO method: LIFO Stands for Last In First Out. Under this method, the latest units purchased are assumed to be sold first and cost of goods sold is calculated accordingly. The ending inventory in the method includes the oldest units purchased.
Requirement-(a):
To determine: The ending inventory, cost of goods sold and gross margin using the FIFO Perpetual inventory method:
Expert Solution
Explanation of Solution
The ending inventory cost of goods sold and gross margin using the FIFO Perpetual inventory method as calculated as follows:
| Hemming Company | |||||||||
| Perpetual Inventory Record | |||||||||
| Using FIFO Method | |||||||||
| Date | Purchases | Cost of Goods Sold | Inventory | ||||||
| Units | Rate | Total Cost | Units | Rate | Total Cost | Units | Rate | Total Cost | |
| Jan. 1 | 200 | $ 10.00 | $ 2,000.00 | ||||||
| Jan. 10 | 150 | $ 10.00 | $ 1,500.00 | 50 | $ 10.00 | $ 500.00 | |||
| Mar. 14 | 350 | $ 15.00 | $ 5,250.00 | 50 | $ 10.00 | $ 500.00 | |||
| 350 | $ 15.00 | $ 5,250.00 | |||||||
| Mar. 15 | 50 | $ 10.00 | $ 500.00 | ||||||
| 250 | $ 15.00 | $ 3,750.00 | 100 | $ 15.00 | $ 1,500.00 | ||||
| Jul. 30 | 450 | $ 20.00 | $ 9,000.00 | 100 | $ 15.00 | $ 1,500.00 | |||
| 450 | $ 20.00 | $ 9,000.00 | |||||||
| Oct. 5 | 100 | $ 15.00 | $ 1,500.00 | ||||||
| 330 | $ 20.00 | $ 6,600.00 | 120 | $ 20.00 | $ 2,400.00 | ||||
| Oct. 26 | 100 | $ 25.00 | $ 2,500.00 | 120 | $ 20.00 | $ 2,400.00 | |||
| 100 | $ 25.00 | $ 2,500.00 | |||||||
| Total | 880 | $ 13,850.00 | 220 | $ 4,900.00 | |||||
Hence, the cost of goods sold is $13,850 and ending inventory is $4,900
The calculation of Gross Margin is as follows:
Sales Revenue (880 units @ $ 40) = $35,200
Less: Cost of Goods sold -$13,850
Gross Margin = $21,350
To determine
Requirement-(b):
To determine: The ending inventory, cost of goods sold and gross margin using the LIFO Perpetual inventory method:
Expert Solution
Explanation of Solution
The ending inventory cost of goods sold and gross margin using the LIFO Perpetual inventory method as calculated as follows:
| Hemming Company | |||||||||
| Perpetual Inventory Record | |||||||||
| Using LIFO Method | |||||||||
| Date | Purchases | Cost of Goods Sold | Inventory | ||||||
| Units | Rate | Total Cost | Units | Rate | Total Cost | Units | Rate | Total Cost | |
| Jan. 1 | 200 | $ 10.00 | $ 2,000.00 | ||||||
| Jan. 10 | 150 | $ 10.00 | $ 1,500.00 | 50 | $ 10.00 | $ 500.00 | |||
| Mar. 14 | 350 | $ 15.00 | $ 5,250.00 | 50 | $ 10.00 | $ 500.00 | |||
| 350 | $ 15.00 | $ 5,250.00 | |||||||
| Mar. 15 | 300 | $ 15.00 | $ 4,500.00 | 50 | $ 10.00 | $ 500.00 | |||
| 50 | $ 15.00 | $ 750.00 | |||||||
| Jul. 30 | 450 | $ 20.00 | $ 9,000.00 | 50 | $ 10.00 | $ 500.00 | |||
| 50 | $ 15.00 | $ 750.00 | |||||||
| 450 | $ 20.00 | $ 9,000.00 | |||||||
| Oct. 5 | 430 | $ 20.00 | $ 8,600.00 | 50 | $ 10.00 | $ 500.00 | |||
| 50 | $ 15.00 | $ 750.00 | |||||||
| 20 | $ 20.00 | $ 400.00 | |||||||
| Oct. 26 | 100 | $ 25.00 | $ 2,500.00 | 50 | $ 10.00 | $ 500.00 | |||
| 50 | $ 15.00 | $ 750.00 | |||||||
| 20 | $ 20.00 | $ 400.00 | |||||||
| 100 | $ 25.00 | $ 2,500.00 | |||||||
| Total | 880 | $ 14,600.00 | 220 | $ 4,150.00 | |||||
Hence, the cost of goods sold is $14,600 and ending inventory is $4,150
The calculation of Gross Margin is as follows:
Sales Revenue (880 units @ $ 40) = $35,200
Less: Cost of Goods sold -$14,600
Gross Margin = $20,600
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Chapter 6 Solutions
Loose Leaf for Fundamental Accounting Principles
Ch. 6 - Prob. 1DQCh. 6 - 2. Where is the amount of merchandise inventory...Ch. 6 - Prob. 3DQCh. 6 - Prob. 4DQCh. 6 - What does the full disclosure principle prescribe...Ch. 6 - Prob. 6DQCh. 6 - Prob. 7DQCh. 6 - Prob. 8DQCh. 6 - Prob. 9DQCh. 6 - What is the meaning of market as it is used in...
Ch. 6 - Prob. 11DQCh. 6 - Prob. 12DQCh. 6 - Prob. 13DQCh. 6 - Prob. 14DQCh. 6 - Prob. 15DQCh. 6 - Prob. 16DQCh. 6 - Prob. 17DQCh. 6 - Prob. 1QSCh. 6 - Prob. 2QSCh. 6 - Prob. 3QSCh. 6 - Prob. 4QSCh. 6 - Prob. 5QSCh. 6 - QS 64
Perpetual Inventory costing with weighted...Ch. 6 - Periodic: Inventory costing with FIFO P3 Refer to...Ch. 6 - Prob. 8AQSCh. 6 - Prob. 9AQSCh. 6 - Prob. 10QSCh. 6 - Prob. 11QSCh. 6 - Prob. 12QSCh. 6 - Prob. 13QSCh. 6 - Prob. 14AQSCh. 6 - Prob. 15AQSCh. 6 - Prob. 16AQSCh. 6 - Prob. 17AQSCh. 6 - Prob. 18QSCh. 6 - Prob. 19QSCh. 6 - Prob. 20QSCh. 6 - Prob. 21QSCh. 6 - Prob. 22BQSCh. 6 - International accounting standards C2 P2 Answer...Ch. 6 - Exercise 6.1 Inventory ownership I. At rear-end,...Ch. 6 - Exercise 6-2 Inventory costs C2 Walberg...Ch. 6 - Prob. 3ECh. 6 - Prob. 4ECh. 6 - Prob. 5AECh. 6 - Exercise 6-6A Periodic: Income effects of...Ch. 6 - Prob. 7ECh. 6 - Prob. 8ECh. 6 - Prob. 9AECh. 6 - Prob. 10ECh. 6 - Prob. 11ECh. 6 - Prob. 12ECh. 6 - Prob. 13ECh. 6 - Prob. 14AECh. 6 - Prob. 15AECh. 6 - Prob. 16BECh. 6 - Prob. 17BECh. 6 - Prob. 18ECh. 6 - Prob. 1APSACh. 6 - Prob. 2AAPSACh. 6 - Prob. 3APSACh. 6 - Prob. 4AAPSACh. 6 - Prob. 5APSACh. 6 - Prob. 6APSACh. 6 - Prob. 7AAPSACh. 6 - Prob. 8AAPSACh. 6 - Prob. 9ABPSACh. 6 - Prob. 10ABPSACh. 6 - Prob. 1BPSBCh. 6 - Problem 6-2BA
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