Exercise 6-13 (20 minutes)
2014 Inventory turnover 2014 Days’ Sales in Inventory
2015 Inventory turnover 2015 Days’ Sales in Inventory
Analysis comment: It appears that during a period of increasing sales, Palmer
has been efficient in controlling its amount of inventory. Specifically, inventory
turnover increased by 2.3 times (7.0 – 4.7) from 2014 to 2015. In addition, days’
sales in inventory decreased by 19.9 days (75.1 – 55.2).
Exercise 6-14A (20 minutes)
Ending
Inventory
Cost of
Goods Sold
a. Specific identification
b. Weighted average ($3,855/1,500 = $2.57)
c. FIFO
d. LIFO
Income effect: FIFO provides the lowest cost of goods sold, the highest
gross profit, and the highest net income, which is not unexpected
during a period of rising costs.
Exercise 6-15A (20 minutes)
Periodic Inventory
Ending
Inventory
Cost of
Goods Sold
a. Specific Identification
(50 x $2.80) + (10 x $2.00)……………………………… $160.00
$2,540.00 [Goods Available] – $160.00 [Ending Inventory]……. $2,380.00
b. Weighted Average ($2,540.00/1,000 = $2.54)
Income effect: LIFO provides the lowest cost of goods sold, the highest
gross profit, and the highest net income, which is not unexpected
during a period of declining costs.
Exercise 6-16B (20 minutes)
At Cost At Retail
Goods available for sale
Beginning inventory………………………………………….. $ 63,800 $128,400
Exercise 6-17B (20 minutes)
Goods available for sale
Inventory, January 1…………………………………………….. $ 225,000
* $795,000 – $11,550 + $18,800 = $802,250
Exercise 6-18 (15 minutes)
1. Samsung generally applies the (weighted) average cost assumption when
2. Under IFRS, Samsung would reverse inventory valuation losses if
inventory values increased in subsequent periods. Specifically, it would
PROBLEM SET A
Problem 6-1A (40 minutes)
1. Compute cost of goods available for sale and units available for sale
Beginning inventory………………………100 units @ $50.00 $ 5,000
March 5………………………………………..400 units @ $55.00 22,000
2. Units in ending inventory
Units available (from part 1)………………………820 units
3a. FIFO perpetual
Date Goods Purchased Cost of Goods Sold Inventory Balance
Mar. 1 100 @ $50.00 = $5,000
Mar. 5 400 @ $55.00 = $22,000 100 @ $50.00
Problem 6-1A (Continued)
3b. LIFO perpetual
Date Goods Purchased Cost of Goods Sold Inventory Balance
Mar. 1 100 @ $50.00 = $ 5,000
Mar. 5 400@ $55.00=
$22,000
100 @ $50.00
400 @ $55.00 = $27,000
3c. Weighted Average perpetual
Date Goods Purchased Cost of Goods Sold Inventory Balance
Mar. 1 100 @ $50.00 = $ 5,000
Mar. 5 400@ $55.00= $22,000 100 @ $50.00
400 @ $55.00 = $27,000
(avg. = $54.00)
Problem 6-1A (Concluded)
3d. Specific Identification
Date Goods Purchased Cost of Goods Sold Inventory Balance
Mar. 1 100 @ $50.00 = $ 5,000
Mar. 5 400 @ $55.00 = $22,000 100 @ $50.00
400 @ $55.00 = $27,000
Mar. 9 80 @ $50.00 = $ 4,000
340 @ $55.00 = $18,700
20 @ $50.00
60 @ $55.00 = $ 4,300
Specific identification—Alternative Computation
Cost of goods sold—80 units from beginning inventory, 340 units from March 5
purchase, 40 units from March 18 purchase, and 120 units from March 25 purchase
Ending Cost of
Specific Identification Inventory Goods Sold
4.
FIFO LIFO
Weighted
Average
Specific
Identifi-ca
tion
Problem 6-2A (40 minutes)
1. Compute cost of goods available for sale and units available for sale
Beginning inventory………………………100 units @ $50.00 $ 5,000
March 5………………………………………..400 units @ $55.00 22,000
2. Units in ending inventory
Units available (from part 1)………………………820 units
3.
Periodic Inventory
Ending
Inventory
Cost of
Goods Sold
a. FIFO
(200 x $62.00) + (40 x $60.00)………………………… $14,800.00
(100 x $50.00) + (400 x $55.00) + (80 x $60.00)… $31,800.00
b. LIFO
Problem 6-2A (Concluded)
4.
FIFO LIFO
Weighted
Average
Specific
Identifi-cat
ion
Sales*………………………………..$50,900.00 $50,900.00 $50,900.00 $50,900.00
*Sales = (420 units x $85.00) + (160 units x $95.00) = $50,900
Problem 6-3A (40 minutes)
1. Calculate cost of goods available for sale and units available for sale
Beginning inventory……………………… 600 units @ $45.00 $27,000
Feb. 10………………………………………… 400 units @ $42.00 16,800
2. Units in ending inventory
Units available (from part 1)………………………1,800
Problem 6-3A (Continued)
3a. FIFO perpetual
Date Goods Purchasd Cost of Goods Sold Inventory Balance
1/1 600 @ $45.00 = $27,000
2/10 400 @ $42.00= $16,800 600 @ $45.00
400 @ $42.00 = $43,800
9/10 200 @ $42.00
FIFO Alternate Solution Format
Cost of goods available for sale $77,200
Less: Cost of sales 600 @ $45.00 $27,000
400 @ $42.00 16,800
Proof of Ending Inventory
Problem 6-3A (Continued)
3b. LIFO perpetual
Date Goods Purchased Cost of Goods Sold Inventory Balance
1/1 600 @ $45.00 = $27,000
2/10 400 @ $42.00= $16,800 600 @ $45.00
3/15 200 @ $27.00
400 @ $42.00
LIFO alternate solution format
Cost of goods available for sale $77,200
Less: Cost of sales 500 @ $46 $23,000
Proof of Ending Inventory