Chapter 05 – Reporting and Analyzing Inventories
Problem 5-3A (Continued)
3d. Specific Identification
Cost of goods available for sale ……………….
$77,200
Less: Cost of Goods Sold
$27,000
12,600
5,400
2,500
11,500
Total cost of goods sold …………………………..
59,000
Ending Inventory ……………………………………..
$18,200
Proof of Ending Inventory
100 @ $42
$ 4,200
50 @ $50
$ 2,500
250 @ $46
11,500
Ending Inventory….
400 units
$18,200
4.
FIFO
LIFO
Specific
Identifi-
cation
Weighted
Average
Sales (1,400 x $75) ……………..
$105,000
$105,000
$105,000
$105,000
Less: Cost of goods sold …...
58,800
59,200
59,000
59,440
Gross profit ………………………..
$ 46,200
$ 45,800
$ 46,000
$ 45,560
5. Montoure’s manager would likely prefer the FIFO method since this
Problem 5-4A (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
Mar. 13 ………………………………………….
200 units @ $27.00
5,400
Aug. 21 ………………………………………….
100 units @ $50.00
5,000
Sept. 5 ………………………………………….
500 units @ $46.00
23,000
Units available ……………………………….
1,800 units
Cost of goods available for sale
$77,200
2. Units in ending inventory
Units available (from part 1) …………..…………..
1,800
Less: Units sold (800+600) …………….…………..
1,400
Ending Inventory (units) ………………..…………
400
Problem 5-5A (50 minutes)
Per Unit
Total
Total
LCM Applied
to Items
Inventory Items
Units
Cost
Market
Cost
Market
Audio equipment:
Receivers ………………..
345
$ 90
$ 98
$ 31,050
$ 33,810
$ 31,050
CD players ……………...
260
111
100
28,860
26,000
26,000
MP3 players …………...
326
86
95
28,036
30,970
28,036
Speakers………………...
204
52
41
10,608
8,364
8,364
Video equipment:
Handheld LCDs ……...
480
150
125
72,000
60,000
60,000
VCRs ……………………...
291
93
84
27,063
24,444
24,444
Camcorders …………...
212
310
322
65,720
68,264
65,720
Car audio equip:
Satellite radios ………..
185
70
84
12,950
15,540
12,950
CD/MP3 radios………..
170
97
105
16,490
17,850
16,490
Total ………………………….
$292,777
$285,242
$273,054
1. Lower of cost or market for inventory applied separately = $273,054
2.
Dec 31
Cost of Goods Sold ………………………………………….….
19,723
Merchandise Inventory ……………………………….….
19,723
To adjust inventory cost to market.
$19,723 = $292,777 – $273,054
Problem 5-7AA (25 minutes)
Part 1
Number and total cost of units available for sale
23,000 units in beginning inventory @ $15 …………………….. $ 345,000
30,000 units purchased @ $18 ……………………………………….. 540,000
39,000 units purchased @ $20 ……………………………………….. 780,000
Problem 5-8AA (Concluded)
Part 2
If QP Corp. had been experiencing declining costs in the acquisition of
inventory, we would observe the opposite results in our comparisons.
Specifically, LIFO would have resulted in a higher ending inventory, lower
cost of goods sold, higher gross profit, and higher net income. FIFO would
income.
Problem 5-10AB (25 minutes)
WAYWARD COMPANY
Estimated Inventory at March 31
Goods available for sale
Inventory, January 1 …………………………………….…
$ 302,580
Cost of goods purchased ……………………………..…
941,040
Goods available for sale ……………………………….…
1,243,620
Less estimated cost of goods sold
Sales ………………………………………………………………
$1,211,160
Less sales returns ……………………………………….…
(8,410)
Net sales ……………………………………………………....
$1,202,750
Estimated cost of goods sold
[$1,202,750 x (1 – 34%)] ………………………………
(793,815)
Estimated March 31 inventory …………………………..
$ 449,805