Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
P6A-32A 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., $6,680
Futuristic Electronic Center began October with 65 units of merchandise inventory that cost $82 each.
During October, the store made the following purchases:
Oct. 3 25 units @ $ 90 each
12 30 units @ $ 90 each
18 35 units @ $ 96 each
Futuristic uses the periodic inventory system, and the physical count at October 31 indicates that 80
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 $28,000. Compute Futuristic’s gross profit for October
using each method.
3. Which method will result in the lowest income taxes for Futuristic? Why? Which method will
result in the highest net income for Futuristic? Why?
SOLUTION
Requirement 1
P6A-32A, cont.
Requirement 1, cont.
P6A-32A, cont.
Requirement 1, cont.
Problems (Group B)
P6-33B Accounting for inventory using the perpetual inventory system—FIFO, LIFO, and weighted-average
Learning Objectives 2, 3
2. Ending Merch. Inv., $4,550
Exercise World began January with merchandise inventory of 90 crates of vitamins that cost a total of $5,850. During the month, Exercise
World purchased and sold merchandise on account as follows:
Jan.
2
Purchase 130 crates @ $ 76
each
5 Sale 140 crates @ $ 100
each
16 Purchase 170 crates @ $ 86
each
27 Sale 180 crates @ $ 104
each
Requirements
1. Prepare a perpetual inventory record, using the FIFO inventory costing method, and determine the company’s cost of goods sold, ending
merchandise inventory, and gross profit.
2. Prepare a perpetual inventory record, using the LIFO inventory costing method, and determine the company’s cost of goods sold, ending
merchandise inventory, and gross profit.
3. Prepare a perpetual inventory record, using the weighted-average inventory costing method, and determine the company’s cost of goods
sold, ending merchandise inventory, and gross profit. (Round weighted-average cost per unit to the nearest cent and all other amounts to
the nearest dollar.)
4. If the business wanted to pay the least amount of income taxes possible, which method would it choose?
SOLUTION
Requirement 1
P6-33B, cont.
Requirement 1, cont.
P6-33B, cont.
Requirement 2
P6-33B, cont.
Requirement 3
P6-33B, cont.
Requirement 3, cont.
