Exercise 5-17B (20 minutes)
Goods available for sale
Inventory, January 1 ……………………………………………..
$ 225,000
Net sales ……………………………………………………………….
Estimated cost of goods sold
Exercise 5-18 (15 minutes)
2. Under IFRS, Samsung would reverse inventory valuation losses if
inventory values increased in subsequent periods. Specifically, it would
PROBLEM SET A
Problem 5-1A (40 minutes)
1. Compute cost of goods available for sale and units available for sale
Beginning inventory ………………………
100 units @ $50.00
$ 5,000
400 units @ $55.00
120 units @ $60.00
200 units @ $62.00
Units available ……………………………….
820 units
2. Units in ending inventory
Units available (from part 1) ……………………….
3.
Periodic Inventory
Ending
Inventory
Cost of
Goods Sold
a. FIFO
(200 x $62.00) + (40 x $60.00) ………………………….
$14,800.00
(100 x $50.00) + (400 x $55.00) + (80 x $60.00) …
$31,800.00
b. LIFO
(100 x $50.00) + (140 x $55.00) ……………………….
$12,700.00
c. Weighted average ($46,600/820 = $56.83)
d. Specific identification
(20x$50)+(60x$55)+(80x$60)+(80x$62) …………….
$14,060.00
Problem 5-1A (Concluded)
4.
FIFO
LIFO
Weighted
Average
Specific
Identifi-
cation
Sales* ………………………………..
$50,900.00
$50,900.00
$50,900.00
$50,900.00
Problem 5-2AA (40 minutes)
1. Compute cost of goods available for sale and units available for sale
Beginning inventory ………………………
100 units @ $50.00
$ 5,000
2. Units in ending inventory
3a. FIFO perpetual
Date
Goods Purchased
Cost of Goods Sold
Inventory Balance
Mar. 1
100 @ $50.00 = $5,000
Mar. 5
400 @ $55.00 = $22,000
320 @ $55.00 = $17,600
Mar. 18
120 @ $60.00 = $ 7,200
Mar. 29
100 @ $50.00
Problem 5-2AA (Continued)
3b. LIFO perpetual
Date
Goods Purchased
Cost of Goods Sold
Inventory Balance
Mar. 1
100 @ $50.00 = $ 5,000
3c. Weighted Average perpetual
Date
Goods Purchased
Cost of Goods Sold
Inventory Balance
Mar. 1
100 @ $50.00 = $ 5,000
Problem 5-2AA (Concluded)
3d. Specific Identification
Date
Goods Purchased
Cost of Goods Sold
Inventory Balance
Mar. 1
100 @ $50.00 = $ 5,000
Mar. 5
400 @ $55.00 = $22,000
100 @ $50.00
400 @ $55.00 = $27,000
120 @ $60.00 = $11,500
120 @ $60.00
200 @ $62.00 = $23,900
Specific identification—Alternative Computation
Cost of goods sold—80 units from beginning inventory, 340 units from March 5
purchase, 40 units from March 18 purchase, and 120 units from March 25 purchase
Ending Cost of
Specific Identification Inventory Goods Sold
4.
FIFO
LIFO
Weighted
Average
Specific
Identifi-
cation
Problem 5-3A (40 minutes)
1. Calculate cost of goods available for sale and units available for sale
Beginning inventory ………………………
600 units @ $45.00
$27,000
400 units @ $42.00
200 units @ $27.00
Aug. 21 …………………………..……………..
100 units @ $50.00
500 units @ $46.00
2. Units in ending inventory
Units available (from part 1) ……………………….
Problem 5-3A (Concluded)
3.
Periodic Inventory
Ending
Inventory
Cost of
Goods Sold
a. FIFO
b. LIFO
c. Weighted average ($77,200/1,800 = $42.89 [rounded])
d. Specific identification
4.
FIFO
LIFO
Specific
Identifi-
cation
Weighted
Average
Sales (1,400 x $75) ……………..
$105,000
$105,000
$105,000
$105,000
Problem 5-4AA (40 minutes)
1. Calculate cost of goods available for sale and units available for sale
Beginning inventory ………………………
600 units @ $45.00
$27,000
400 units @ $42.00
200 units @ $27.00
Aug. 21 …………………………..……………..
100 units @ $50.00
500 units @ $46.00
2. Units in ending inventory
Problem 5-4AA (Continued)
3a. FIFO perpetual
Date
Goods Purchasd
Cost of Goods Sold
Inventory Balance
1/1
600 @ $45.00 = $27,000
2/10
400 @ $42.00= $16,800
400 @ $42.00 = $49,200
200 @ $42.00 = $35,400
200 @ $27.00 = $13,800
200 @ $27.00 = $18,800
100 @ $50.00
100 @ $50.00
600 @ $45.00
FIFO Alternate Solution Format
Cost of goods available for sale
$77,200
Less: Cost of sales
600 @ $45.00
$27,000
400 @ $42.00
200 @ $27.00
100 @ $50.00
100 @ $46.00
Ending Inventory
$18,400
Proof of Ending Inventory
$18,400
Problem 5-4AA (Continued)
3b. LIFO perpetual
Date
Goods Purchased
Cost of Goods Sold
Inventory Balance
1/1
600 @ $45.00 = $27,000
2/10
400 @ $42.00= $16,800
400 @ $42.00 = $49,200
200 @ $45.00 = $31,200
100 @ $50.00= $ 5,000
400 @ $45.00
100 @ $50.00
500 @ $46.00
600 @ $45.00
LIFO alternate solution format
Cost of goods available for sale
$77,200
Less: Cost of sales
500 @ $46
$23,000
100 @ 50
200 @ 27
400 @ 42
200 @ 45
Cost of Goods Sold
Ending Inventory
$18,000
Proof of Ending Inventory
Problem 5-4AA (Continued)
3c. Weighted Average
Date
Goods Purchased
Cost of Goods Sold
Inventory Balance
1/1
600 @ $45.00 = $27,000
2/10
3/13
3/15
800 @ $41.00 = $32,800
400 @ $41.00 = $16,400
Problem 5-4AA (Continued)
3d. Specific Identification
Cost of goods available for sale ……………….
$77,200
Less: Cost of Goods Sold
600 @ $45.00 ……………………………….
300 @ $42.00 ……………………………….
200 @ $27.00 ……………………………….
250 @ $46.00 ……………………………….
Total cost of goods sold …………………………..
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 ……
5. Montoure’s manager would likely prefer the FIFO method since this
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
28,036
30,970
28,036
Speakers…………………
204
10,608
Video equipment:
Handheld LCDs ………
480
150
125
72,000
60,000
60,000
VCRs ………………………
291
27,063
24,444
24,444
Camcorders ……………
212
310
322
65,720
68,264
65,720
Satellite radios ………..
185
12,950
15,540
12,950
CD/MP3 radios………..
170
105
16,490
17,850
2.
Dec 31
Cost of Goods Sold ……………………………………………..
19,723
Problem 5-6A (35 minutes)
Part 1
(a)
Cost of goods sold
2015
2016
2017
Reported …………………………………
$ 615,000
$ 957,000
$ 780,000
Adjustments: 12/31/2015 error ……
+ 20,000
– 20,000
Corrected ……………………………….
$ 559,000
$1,033,000
$ 760,000
(b)
Net income
2015
2016
2017
Reported …………………………………
$ 230,000
$ 285,000
$ 241,000
Adjustments: 12/31/2015 error ……
– 20,000
+ 20,000
Corrected ……………………………….
$ 286,000
$ 209,000
$ 261,000
(c)
Total current assets
2015
2016
2017
Reported …………………………………
$1,255,000
$1,365,000
$1,200,000
Adjustments: 12/31/2015 error ……
– 20,000
Corrected ……………………………….
$1,311,000
$1,345,000
$1,200,000
(d)
Equity
2015
2016
2017
Reported …………………………………
$1,387,000
$1,530,000
$1,242,000
Adjustments: 12/31/2015 error ……
_________
– 20,000
Part 2
Total net income for the combined three-year period ($756,000) is not affected
Part 3
The understatement of inventory by $56,000 results in an overstatement of cost of
Problem 5-7A (25 minutes)
Part 1
Number and total cost of units available for sale
23,000 units in beginning inventory @ $15 …………………….. $ 345,000
Part 2
a. FIFO periodic
Total cost of 150,000 units available for sale ……………….
$3,150,000
Less ending inventory on a FIFO basis
b. LIFO periodic
Total cost of 150,000 units available for sale ……………….
$3,150,000
Less ending inventory on a LIFO basis
c. Weighted average periodic
Total cost of 150,000 units available for sale ……………….
$3,150,000
Problem 5-8A (50 minutes)
Part 1
QP CORP.
Income Statements Comparing FIFO, LIFO, and Weighted Average
For Year Ended December 31, 2016
FIFO
LIFO
Weighted
Average
Sales ……………………………………………………..
$200,000
$200,000
$200,000
Cost of goods sold
Supporting calculations
FIFO
LIFO
Weighted
Average
Dec. 31, 2015, inventory (700 x $18). …………….
$ 12,600
$ 12,600
$ 12,600
Purchases
1,700 x $19 = $32,300
800 x $20 = 16,000
500 x $21 = 10,500
Dec. 31, 2016, inventory (6,000-4,000=2,000 units)
(700 x $18) + (1,300 x $19)
($122,000/6,000=$20.33) x 2,000
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.
Part 3
Advantages
LIFO: Given the cost trends in the problem, the advantage of using LIFO is
Disadvantages
LIFO: Given the cost trends in the problem, the disadvantage of using LIFO
is that the inventory figure, which is also reported on the balance sheet,
will likely be understated in comparison to the current replacement costs.
Problem 5-9AB (25 minutes)
Part 1
ALASKA COMPANY
Estimated Inventory
December 31
At Cost
At Retail
Goods available for sale
Beginning inventory……………………………………..
$ 469,010
$ 928,950
Cost of goods purchased ……………………………..
6,381,050
Net sales ………………………………………………………..
Part 2
ALASKA COMPANY
Inventory Shortage
December 31
At Cost
At Retail
Estimated inventory (from part 1) ……………………….
$ 924,182
$ 1,757,000
Physical inventory ……………………………………………..
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 ………………………………….
Less estimated cost of goods sold
Net sales ……………………………………………………….
Estimated March 31 inventory …………………………..