P6A-37B Accounting for inventory using the periodic inventory system—FIFO, LIFO, and
weighted-average, and comparing FIFO, LIFO, and weighted-average
Learning Objectives 2, 3, 7 Appendix 6A
1. LIFO Ending Merch. Inv., $9,460
Right Now Electronic Center began October with 100 units of merchandise inventory that cost $70 each.
During October, the store made the following purchases:
Oct. 3 35 units @ $ 82 each
12 45 units @ $ 84 each
18 75 units @ $ 90 each
Right Now uses the periodic inventory system, and the physical count at October 31 indicates that 130
units of merchandise inventory are on hand.
Requirements
1. Determine the ending merchandise inventory and cost of goods sold amounts for the October
financial statements using the FIFO, LIFO, and weighted-average inventory costing methods.
2. Net sales revenue for October totaled $26,000. Compute Right Now’s gross profit for October using
each method.
3. Which method will result in the lowest income taxes for Right Now? Why? Which method will
result in the highest net income for Right Now? Why?
SOLUTION
Requirement 1
P6A-37B, cont.
Requirement 1, cont.
Requirement 2
Using Excel
P6-38 Using Excel for Inventory Cost Flow Assumptions.
Johnson Company uses a perpetual inventory system. The January 2018 inventory information is as
follows. Assume cash purchases and sales.
Date Description Units Per
Unit
Jan 1 Inventory on
hand
1,000 $ 4
3 Purchase 3,000 5
6 Sale 2,750 10
15 Purchase 5,000 6
22 Sale 4,500 10
Requirements
1. Prepare a perpetual inventory record using FIFO, LIFO, and weighted-average inventory costing
methods, and determine cost of goods sold and ending merchandise inventory. Use cell
references from Data table for quantities and unit cost. Use Excel formulas for total costs and
total quantities. Format weighted-average unit costs and total costs to display two decimal
places.
2. Journalize Johnson Company’s inventory transactions under each of the three methods.
SOLUTION
© 2018 Pearson Education, Inc. 6-4
Continuing Problem
P6-39 Accounting for inventory using the perpetual inventory system—FIFO
This problem continues the Canyon Canoe Company situation from Chapter 5. At the beginning
of the January 2019, Canyon Canoe Company decided to carry and sell T-shirts with its logo
printed on them. Canyon Canoe Company uses the perpetual inventory system to account for the
inventory. During February 2019, Canyon Canoe Company completed the following
merchandising transactions:
Feb. 2 Sold 60 T-shirts at $10 each.
5 Purchased 50 T-shirts at $6 each.
7 Sold 45 T-shirts for $10 each.
8 Sold 20 T-shirts for $10 each.
10 Canyon Canoe Company realized the inventory was running
low, so it placed a rush order and purchased 20 T-shirts. The
premium cost for these shirts was $7 each.
12 Placed a second rush order and purchased 40 T-shirts at $7
each.
13 Sold 20 T-shirts for $10 each.
15 Purchased 50 T-shirts for $6 each.
20 In order to avoid future rush orders, purchased 150 T-shirts.
Due to the volume of the order, Canyon Canoe Company was
able to negotiate a cost of $5 each.
21 Sold 40 T-shirts for $10 each.
22 Sold 35 T-shirts for $10 each.
24 Sold 20 T-shirts for $10 each.
25 Sold 45 T-shirts for $10 each.
27 Sold 40 T-shirts for $10 each.
Requirements
1. Assume Canton Canoe Company began February with 94 T-shirts in inventory that cost $5
each. Prepare the perpetual inventory records for February using the FIFO inventory costing
method.
2. Provide a summary for the month, in both units and dollars, of the change in inventory in the
following format:
SOLUTION
Requirement 1
P6-39, cont.
Requirement 2
Practice Set
P6-40 Accounting for inventory using the perpetual inventory system—FIFO
This problem continues the Crystal Clear Cleaning problem begun in Chapter 2 and continued
through Chapter 5.
Consider the December transactions for Crystal Clear Cleaning that were presented in Chapter 5.
(Cost data have been removed from the sale transactions.) Crystal Clear uses the perpetual
inventory system.
Dec. 2 Purchased 1,000 units of inventory for $4,000 on account from Sparkle
Company on terms, 5/10, n/20.
5 Purchased 1,200 units of inventory from Borax on account with terms 4/10,
n/30. The total invoice was for $6,000, which included a $300 freight
charge.
7 Returned 300 units of inventory to Sparkle from the December 2 purchase.
9 Paid Borax.
11 Sold 500 units of goods to Happy Maids for $5,500 on account with terms
n/30.
12 Paid Sparkle.
15 Received 100 units with a sales price of $1,100 of goods back from
customer Happy Maids.
21 Received payment from Happy Maids, settling the amount due in full.
28 Sold 500 units of goods to Bridget, Inc. on account for $6,500. Terms 1/15,
n/30.
29 Paid cash for utilities of $550.
30 Paid cash for Sales Commission Expense of $214.
31 Received payment from Bridget, Inc., less discount.
31 Recorded the following adjusting entries:
a. Physical count of inventory on December 31 showed 800 units of goods
on hand.
b. Depreciation, $150.
c. Accrued salaries expense of $2,100.
d. Estimated sales returns of $1,500, with cost of $540.
e. Prepared all other adjustments necessary for December (Hint: You will
need to review the adjustment information in Chapter 3 to determine the
remaining adjustments). Assume the cleaning supplies left at December
31 are $50.
Requirements
1Prepare perpetual inventory records for December for Crystal Clear Cleaning using the
FIFO inventory costing method. (Note: You must calculate the cost of goods sold on the
11th, 28th, and 31st (adjusting entry a).) Round per unit costs to two decimal places.
2Journalize the transactions for December 11th, 28th, and 31st (adjusting entry a only)
using the perpetual inventory record created in Requirement 1.
SOLUTION
Requirement 1
P6-40, cont.
Requirement 2
