Problem 6-3B (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
3a. FIFO 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 9 150 @ $300 = $ 45,000
30 @ $350 = $ 10,500
320 @ $350 = $112,000
Problem 6-3B (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 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 30 300 @ $378 = $113,400 200 @ $378 = $ 75,600
(avg. = $378)
$173,700
Problem 6-3B (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 6-3B (Continued)
4.
FIFO LIFO
Weighted
Average
Specific
Identifi-
cation
Sales*…………………………………$636,000 $636,000 $636,000 $636,000
5. The manager of Aloha Company likely will prefer the FIFO method
Problem 6-4B (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 6-4B (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
c. Weighted average ($249,300/680=$366.62 [rounded])
(200 x $366.62)………………………………………………… $73,324.00
$249,300 [Goods Available] – $73,324 [Ending Inventory]........... $175,976.00
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
the largest gross profit (in this period of rising costs). This would give
the manager the highest bonus based on gross profit.
Problem 6-5B (50 minutes)
Per Unit Total Total LCM Applied
Inventory Items Units Cos
t
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
Office equipment
Fax machines...... 370 168 200 62,160 74,000 62,160
Copiers………….... 475 317 288 150,575 136,800 136,800
Corrected………..…………………………. $ 296,000 $ 341,000 $ 346,000
Part 2
Total net income for the combined three-year period ($572,980) is not affected by
understatement (or overstatement) in the following year.
Part 3
The overstatement of inventory by $18,000 results in an understatement of cost of
goods sold by that same amount. The $18,000 understatement of cost of goods
Problem 6-7BA (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
b. LIFO periodic
Total cost of 50,000 units available for sale….... $1,560,000
Less ending inventory on a LIFO basis
c. Weighted average periodic
Total cost of 50,000 units available for sale….... $1,560,000
Less ending inventory at weighted average cost