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Problem 5-3B (Continued)
3b. LIFO perpetual
Date Goods Purchased Cost of Goods Sold Inventory Balance
May 1 150 @ $300 = $ 45,000
May 6 350 @ $350 = $122,500 150 @ $300
350 @ $350 = $167,500
May 9 180 @ $350 = $ 63,000 150 @ $300
170 @ $350 = $104,500
May 30
100 @ $458 = $ 45,800
80 @ $450 = $ 36,000
120 @ $350 = $ 42,000
150 @ $300
50 @ $350 = $ 62,500
$186,800
3c. Weighted Average perpetual
Date Goods Purchased Cost of Goods Sold Inventory Balance
May 1 150 @ $300 = $ 45,000
May 6 350 @ $350 = $122,500 150 @ $300
350 @ $350 = $167,500
(avg. = $335)
May 9 180 @ $335 = $ 60,300 320 @ $335 = $107,200
(avg. = $335)
Problem 5-3B (Continued)
3d. Specific Identification
Date Goods Purchased Cost of Goods Sold Inventory Balance
May 1 150 @ $300 = $ 45,000
May 6 350 @ $350 = $122,500 150 @ $300
350 @ $350 = $167,500
May 9 80 @ $300 = $ 24,000
100 @ $350 = $ 35,000
70 @ $300
250 @ $350 = $108,500
May 30 200 @ $350 = $ 70,000
100 @ $458 = $ 45,800
70 @ $300
50 @ $350
80 @ $450 = $ 74,500
$174,800
Specific identification—Alternative Computation
Cost of goods sold—80 units from beginning inventory, 300 [100+200] units from May
6 purchase, and 100 units from May 25 purchase
Ending Cost of
Specific Identification Inventory Goods Sold
Problem 5-3B (Continued)
4.
FIFO LIFO
Weighted
Average
Specific
Identifi-
cation
Sales*.......................................$636,000 $636,000 $636,000 $636,000
Problem 5-4B (40 minutes)
1. Compute cost of goods available for sale and units available for sale
Beginning inventory............................ 150 units @ $300 $ 45,000
May 6.................................................... 350 units @ $350 122,500
2. Units in ending inventory
Units available (from part 1)............................680 units
Problem 5-4B (Concluded)
3.
Periodic Inventory
Ending
Inventory
Cost of
Goods Sold
a. FIFO
(100 x $458.00) + (80 x $450.00) + (20 x $350.00). . $88,800.00
(150 x $300.00) + (330 x $350.00)............................ $160,500.00
b. LIFO
d. Specific identification
(70x$300)+(50x$350)+(80x$450)+(0x$458) ............ $74,500.00
$249,300 [Goods Available] - $74,500 [Ending Inventory]........... $174,800.00
4.
FIFO LIFO
Weighted
Average
Specific
Identifi-
cation
Sales*.......................................$636,000 $636,000 $636,000 $636,000
5. The manager likely will prefer the FIFO method because it would yield
Problem 5-5B (50 minutes)
Per Unit Total Total LCM Applied
Inventory Items Units Cost Market Cost Market to Items
Office furniture
Desks.................. 536 $261 $305 $139,896 $163,480 $139,896
Credenzas........... 395 227 256 89,665 101,120 89,665
Chairs.................. 687 49 43 33,663 29,541 29,541
Bookshelves....... 421 93 82 39,153 34,522 34,522
Filing cabinets
Copiers................ 475 317 288 150,575 136,800 136,800
Telephones.......... 302 125 117 37,750
35,334
35,334
Total...................... $610,126
$627,983
$580,054
1. Lower of cost or market for inventory applied separately = $580,054
2.
Dec 31 Cost of Goods Sold.....................................................30,072
Problem 5-6B (35 minutes)
Part 1
(a)
Cost of goods sold 2014 2015 2016
Reported.................................... $ 207,200 $ 213,800 $ 197,030
Adjustments: 12/31/2014 error + 18,000 - 18,000
(b)
Net income 2014 2015 2016
Reported.................................... $ 175,800 $ 212,270 $ 184,910
Adjustments: 12/31/2014 error - 18,000 + 18,000
(c)
Total current assets 2014 2015 2016
Reported.................................... $ 276,000 $ 277,500 $ 272,950
Adjustments: 12/31/2014 error - 18,000
(d)
Equity 2014 2015 2016
Reported............................................ $ 314,000 $ 315,000 $ 346,000
Adjustments: 12/31/2014 error - 18,000
Part 2
Total net income for the combined three-year period ($572,980) is not affected by
Part 3
The overstatement of inventory by $18,000 results in an understatement of cost of
Problem 5-7BA (25 minutes)
Part 1
Number and total cost of units available for sale
6,500 units in beginning inventory @ $35............................. $ 227,500
11,500 units purchased @ $33.................................................. 379,500
13,400 units purchased @ $32.................................................. 428,800
Problem 5-8BA (30 minutes)
Part 1
SHEPARD COMPANY
Income Statements Comparing FIFO, LIFO, and Weighted Average
For Year Ended December 31, 2015
FIFO LIFO
Weighted
Average
Sales............................................................... $400,000 $400,000 $400,000
Cost of goods sold
Inventory, Dec. 31, 2014.............................. 48,720 48,720 48,720
Cost of purchases....................................... 261,280 261,280 261,280
Cost of goods available for sale................ 310,000 310,000 310,000
Inventory, Dec. 31, 2015.............................. 65,000 58,160 62,000
Cost of goods sold...................................... 245,000 251,840 248,000
Supporting calculations
FIFO LIFO
Weighted
Average
Dec. 31, 2014, inventory (840 x $58)................... $ 48,720 $ 48,720 $ 48,720
Purchases
600 x $59 = $ 35,400
1,205 x $61 = 73,505
700 x $64 = 44,800
1,655 x $65 = 107,575 261,280 261,280 261,280
Total cost of goods available $310,000 $310,000 $310,000
