Chapter 05 – Reporting and Analyzing Inventories
Exercise 5-17B (20 minutes)
Goods available for sale
Inventory, January 1 ………………………………………….….
$ 225,000
Net cost of goods purchased* …………………………….….
802,250
Goods available for sale …………………………………….….
1,027,250
Less estimated cost of goods sold
Net sales ……………………………………………………………….
$1,000,000
Estimated cost of goods sold
[$1,000,000 x (1 – 30%)] …………………………………….
(700,000)
Estimated March 31 inventory ………………………………….
$ 327,250
* $795,000 – $11,550 + $18,800 = $802,250
Exercise 5-18 (15 minutes)
1. Samsung generally applies the (weighted) average cost assumption when
transit.
2. Under IFRS, Samsung would reverse inventory valuation losses if
inventory values increased in subsequent periods. Specifically, it would
Problem 5-1A (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
March 18 ………………………………………..
120 units @ $60.00
7,200
March 25 ………………………………………..
200 units @ $62.00
12,400
Units available ……………………………….
820 units
Cost of goods available for sale
$46,600
2. Units in ending inventory
Units available (from part 1) …………..…………..
820 units
Less: Units sold (420 + 160) …………..…………..
580 units
Ending Inventory (units) ………………..…………
240 units
Problem 5-1A (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
Mar. 18
120 @ $60.00 = $ 7,200
20 @ $50.00
60 @ $55.00
120 @ $60.00 = $11,500
Mar. 25
200 @ $62.00 = $12,400
20 @ $50.00
60 @ $55.00
120 @ $60.00
200 @ $62.00 = $23,900
Mar. 29
40 @ $60.00 = $ 2,400
120 @ $62.00 = $ 7,440
______
20 @ $50.00
60 @ $55.00
80 @ $60.00
80 @ $62.00 = $14,060
$32,540
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
(80x$50) + (340x$55) + (40x$60) + (120x$62) ……. $32,540
$46,600 [Total Goods Available] – $32,540 [Cost of Goods Sold] … $14,060
4.
FIFO
LIFO
Weighted
Average
Specific
Identifi-
cation
Sales* ………………………………..
$50,900
$50,900
$50,900
$50,900
Less: Cost of goods sold …...
31,800
32,920
32,248
32,540
Gross profit ………………………..
$ 19,100
$17,980
$ 18,652
$ 18,360
*Sales = (420 units x $85.00) + (160 units x $95.00) = $50,900
Problem 5-2A (Concluded)
4.
FIFO
LIFO
Weighted
Average
Specific
Identifi-
cation
Sales* ………………………………..
$50,900.00
$50,900.00
$50,900.00
$50,900.00
Less: Cost of goods sold …...
31,800.00
33,900.00
32,960.80
32,540.00
Gross profit ………………………..
$19,100.00
$17,000.00
$17,939.20
$18,360.00
*Sales = (420 units x $85.00) + (160 units x $95.00) = $50,900
Problem 5-3A (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
3/13
200 @ $27.00= $ 5,400
600 @ $45.00
400 @ $42.00 = $49,200
200 @ $27.00
3/15
600 @ $45.00
200 @ $42.00 = $35,400
200 @ $42.00
200 @ $27.00 = $13,800
8/21
100 @ $50.00= $ 5,000
200 @ $42.00
200 @ $27.00 = $18,800
100 @ $50.00
9/5
500 @ $46.00= $23,000
200 @ $42.00
200 @ $27.00
100 @ $50.00
500 @ $46.00 = $41,800
9/10
200 @ $42.00
200 @ $27.00
100 @ $50.00
100 @ $46.00 = $23,400
400 @ $46.00 = $18,400
$58,800
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
200 @ $27.00
5,400
100 @ $50.00
5,000
100 @ $46.00
4,600
Total cost of goods sold
58,800
Ending Inventory
$18,400
Proof of Ending Inventory
400 @ $46.00
$18,400
Ending Inventory ……………..
400 units
$18,400
Problem 5-3A (Continued)
3c. Weighted Average
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
400 @ $42.00 = $43,800
(avg. cost is $43.80)
3/13
200 @ $27.00= $ 5,400
600 @ $45.00
400 @ $42.00 = $49,200
200 @ $27.00
(avg. cost is $41.00)
3/15
800 @ $41.00 = $32,800
400 @ $41.00 = $16,400
8/21
100 @ $50.00= $ 5,000
400 @ $41.00
100 @ $50.00 = $21,400
(avg. cost is $42.80)
9/5
500 @ $46.00= $23,000
400 @ $41.00
100 @ $50.00
500 @ $46.00 = $44,400
(avg. cost is $44.40)
9/10
600 @ $44.40 = $26,640
400 @ $44.40 = $17,760
$59,440