*PROBLEM 6-8B (Continued)
(b)
Gross profit:
LIFO
FIFO
Moving-Average
Sales
$13,800
$13,800
$13,800
Cost of goods sold
7,260
6,020
6,446
Gross profit
$ 6,540
$ 7,780
$ 7,354
Ending inventory
$ 2,040
$ 3,280
$ 2,854
On the balance sheet, FIFO gives the highest ending inventory (represent–
ing the most current costs); LIFO gives the lowest ending inventory
*PROBLEM 6-9B
(a)
(1)
FIFO
Date
Purchases
Cost of
Goods Sold
Balance
May 1
(7 @ $150)
$1,050
(7 @ $150)
$1,050
4
(4 @ $150)
$600
(3 @ $150)
$ 450
8
(8 @ $170)
$1,360
(3 @ $150)
}
$1,810
(8 @ $170)
12
(3 @ $150)
}
$790
(2 @ $170)
(6 @ $170)
$1,020
15
(6 @ $185)
$1,110
(6 @ $170)
}
$2,130
(6 @ $185)
20
(3 @ $170)
$510
(3 @ $170)
}
$1,620
(6 @ $185)
25
(3 @ $170)
}
$695
(1 @ $185)
(5 @ $185)
$ 925
(2)
MOVING-AVERAGE COST
Date
Purchases
Cost of
Goods Sold
Balance
May 1
(7 @ $150)
$1,050
( 7 @ $150)
$1,050
4
(4 @ $150)
$600
( 3 @ $150)
$ 450
8
(8 @ $170)
$1,360
(11 @ $164.55)*
$1,810
12
(5 @ $164.55)
$823
( 6 @ $164.55)
$ 987
15
(6 @ $185)
$1,110
(12 @ $174.75)**
$2,097
20
(3 @ $174.75)
$524
( 9 @ $174.75)
$1,573
25
(4 @ $174.75)
$699
( 5 @ $174.75)
$ 874
*PROBLEM 6-9B (Continued)
(3)
LIFO
Date
Purchases
Cost of
Goods Sold
Balance
May 1
(7 @ $150)
$1,050
(7 @ $150)
$1,050
4
(4 @ $150)
$600
(3 @ $150)
$ 450
8
(8 @ $170)
$1,360
(3 @ $150)
}
$1,810
(8 @ $170)
12
(5 @ $170)
$850
(3 @ $150)
}
$ 960
(3 @ $170)
15
(6 @ $185)
$1,110
(3 @ $150)
}
$2,070
(3 @ $170)
(6 @ $185)
20
(3 @ $185)
$555
(3 @ $150)
}
$1,515
(3 @ $170)
(3 @ $185)
25
(3 @ $185)
}
$725
(3 @ $150)
}
$ 790
(1 @ $170)
(2 @ $170)
*PROBLEM 6-10B
(a)
February
Net sales ………………………………………….. $300,000
Cost of goods sold
Beginning inventory ………………….. $ 4,500
Net purchases …………………………... $176,800
Add: Freight-in …………………………. 3,900
Gross profit rate
=
$135,000
=
45%
$300,000
(b) Net sales …………………………………………………….. $250,000
Less: Estimated gross profit
(45% X $250,000) ………………………………. 112,500
Estimated cost of goods sold ………………………. $137,500
Beginning inventory ……………………………………. $ 20,200
Net purchases …………………………………………….. $139,000
*PROBLEM 6-11B
(a)
Sporting
Goods
Jewelry
and Cosmetics
Cost
Retail
Cost
Retail
Beginning inventory $ 47,360 $ 74,000 $ 39,440 $ 62,000
Purchases 675,000 1,066,000 741,000 1,158,000
Purchase returns (26,000) (40,000) (12,000) (20,000)
Cost-to-retail ratio:
Estimated ending inventory at cost:
COMPREHENSIVE PROBLEM SOLUTION
(a)
Dec. 3
Inventory (4,000 X $0.72) ………………………
Accounts Payable ………………………….
2,880
2,880
5
Accounts Receivable (4,400 X $0.90) ……..
Sales Revenue ………………………………
Cost of Good Sold ………………………………..
Inventory (3,000 X $0.60) +
(1,400 X $0.72) …………………………….
3,960
2,808
3,960
2,808
7
Sales Returns and Allowances ……………..
Accounts Receivable……………………..
Inventory …………………………..…………………
Cost of Good Sold …………………………
180
120
180
120
17
Inventory (2,200 X $0.80) ………………………
Cash …………………………..………………..
1,760
1,760
22
Accounts Receivable (2,000 X $0.95) ……..
Sales Revenue ………………………………
Cost of Goods Sold (2,000 X $0.72) ……….
Inventory ………………………………………
1,900
1,440
1,900
1,440
31
Salaries and Wages Expense ………………..
Salaries and Wages Payable …………..
Depreciation Expense …………………………..
Accumulated Depreciation—
Equipment ………………………………….
400
200
400
200
COMPREHENSIVE PROBLEM SOLUTION (Continued)
(b) General Ledger
Cash
Bal. 4,800
1,760
Bal. 3,040
Inventory
Bal. 2,312
Bal. 5,880
Bal. 21,000
Bal. 1,700
Accounts Receivable
Bal. 3,900
3,960
1,900
180
Bal. 9,580
Bal. 400
Bal. 5,860
Bal. 4,128
Bal. 200
Bal. 20,000
Bal. 7,000
Bal. 400
Bal. 180
COMPREHENSIVE PROBLEM SOLUTION (Continued)
(c) Matthias COMPANY
Adjusted Trial Balance
December 31, 2015
DR.
CR.
Cash ……………………………………………………..
$ 3,040
Accounts Receivable ……………………………..
9,580
Inventory ……………………………………………….
2,312
Equipment……………………………………………..
21,000
Accumulated Depreciation—Equipment ….
$ 1,700
Accounts Payable …………………………..……..
5,880
Salaries and Wages Payable …………………..
400
Common Stock ………………………………………
Retained Earnings ………………………………….
20,000
7,000
Sales Revenue ……………………………………….
5,860
Sales Returns & Allowances …………………..
180
Cost of Goods Sold ………………………………..
4,128
Salaries and Wages Expense ………………….
400
Depreciation Expense …………………………….
200
$40,840
$40,840
(d) Matthias COMPANY
Income Statement
For the Month Ending December 31, 2015
Sales revenue ………………………………………
$5,860
Less: Sales returns and allowances ……..
180
Net sales ……………………………………………..
$5,680
Cost of goods sold ……………………………….
4,128
Gross profit …………………………..…………….
1,552
Operating expenses
Salaries and wages expense ………….
400
Depreciation expense …………………….
200
600
Net income…………………………………………..
$ 952
COMPREHENSIVE PROBLEM SOLUTION (Continued)
Matthias COMPANY
Balance Sheet
December 31, 2015
Assets
Current assets
Cash ……………………………………………….
$ 3,040
Accounts receivable …………………………
9,580
Inventory …………………………………………
2,312
Total current assets …………………….
$14,932
Property, plant, and equipment
Equipment ……………………………………….
21,000
Less: Accumulated depreciation—
Equipment …………………………….
1,700
19,300
Total assets ……………………………………………
$34,232
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable …………………………….
$5,880
Salaries and wages payable ……………..
400
Total current liabilities …………………
$ 6,280
Stockholders’ equity
Common stock ………………………………..
Retained earnings ($7,000 + $952) …….
20,000
7,952
27,952
Total liabilities and stockholders’ equity ….
$34,232
COMPREHENSIVE PROBLEM SOLUTION (Continued)
(e) FIFO Method
Units
Unit Cost
Cost of Goods
Available for Sales
Beg. Inventory
3,000
$0.60
$1,800
Dec. 3 purchase.
4,000
$0.72
2,880
Dec. 17 purchase.
2,200
$0.80
1,760
9,200
$6,440
Ending Inventory
Cost of Goods Sold
Dec. 17
2,200 X $0.80 = $1,760
Cost of goods available for sale
$6,440
Dec. 3
800* X $0.72 = 576
Less: Ending inventory
2,336
3,000 $2,336
Cost of goods sold
$4,104
(f) LIFO Method
Ending Inventory
Cost of Goods Sold
Dec. 1
3,000 X $0.60 = $1,800
Cost of goods available for sale
$6,440
Less: Ending inventory
1,800
Cost of goods sold
$4,640