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S6-6 Preparing a perpetual inventory record and journal entries—Weighted-average
Learning Objective 2
Requirements
1. Prepare Boston Cycle’s perpetual inventory record assuming the company uses the weighted-average inventory costing method.
2. Journalize the October 16 purchase of merchandise inventory on account and the October 31 sale of merchandise inventory on account.
SOLUTION
Requirement 1
S6-6, cont.
Requirement 2
S6-7 Comparing Cost of Goods Sold under FIFO, LIFO, and Weighted-average
Learning Objective 3
Refer to Short Exercises S6-4 through S6-6. After completing those exercises, answer the
following questions:
Requirements
1. Which inventory costing method produced the lowest cost of goods sold?
2. Which inventory costing method produced the highest cost of goods sold?
3. If costs had been declining instead of rising, which inventory costing method would have
produced the highest cost of goods sold?
SOLUTION
Requirement 1
S6-8 Applying the lower-of-cost-or-market rule
Learning Objective 4
Assume that a Logan Burger restaurant has the following perpetual inventory record for
hamburger patties:
Date Purchases Cost of Goods Sold Merchandise Inventory on Hand
Jul. 9 $ 450 $ 450
22 $ 270 180
31 210 390
At July 31, the accountant for the restaurant determines that the current replacement cost of the
ending merchandise inventory is $435. Make any adjusting entry needed to apply the
lower-of-cost-or-market rule. Merchandise inventory would be reported on the balance sheet at
what value on July 31?
SOLUTION
S6-9 Determining the effect of an inventory error
Learning Objective 5
New York Pool Supplies’s merchandise inventory data for the year ended December 31, 2019,
follow:
Requirements
1. Assume that the ending merchandise inventory was accidentally overstated by $1,800.
What are the correct amounts for cost of goods sold and gross profit?
2. How would the inventory error affect New York Pool Supplies’s cost of goods sold and
gross profit for the year ended December 31, 2020, if the error is not corrected in 2019?
SOLUTION
Requirement 1
S6-10 Computing the rate of inventory turnover and days’ sales in inventory
Learning Objective 6
Broadway Communications reported the following figures in its annual financial statements:
Cost of Goods Sold $ 18,400
Beginning Merchandise Inventory 560
Ending Merchandise Inventory 450
Compute the rate of inventory turnover and days’ sales in inventory for Broadway
Communications. (Round to two decimal places.)
Use the following information to answer Short Exercises S6A-11 through S6A-13.
The periodic inventory records of Flexon Prosthetics indicate the following for the month of
July:
Jul. 1 Beginning merchandise inventory 6 units @ $ 60 each
8 Purchase 5 units @ $ 67 each
15 Purchase 10 units @ $ 70 each
26 Purchase 5 units @ $ 85 each
At July 31, Flexon counts four units of merchandise inventory on hand.
SOLUTION
S6A-11 Computing periodic inventory amounts—FIFO
Learning Objective 7 Appendix 6A
Compute ending merchandise inventory and cost of goods sold for Flexon using the FIFO
inventory costing method.
SOLUTION
Totals 22 units $ 1,480
S6A-12 Computing periodic inventory amounts—LIFO
Learning Objective 7 Appendix 6A
Compute ending merchandise inventory and cost of goods sold for Flexon using the LIFO
inventory costing method.
SOLUTION
S6A-13 Computing periodic inventory amounts—Weighted-average
Learning Objective 7 Appendix 6A
Compute ending merchandise inventory and cost of goods sold for Flexon using the
weighted-average inventory costing method.
SOLUTION
