PROBLEM SET B
Problem 5-1B (40 minutes)
1. Compute cost of goods available for sale and units available for sale
Beginning inventory ………………………
20 units @ $3,000
$ 60,000
April 6 …………………………………………..
30 units @ $3,500
105,000
April 17 ………………………………………….
April 25 ………………………………………….
10 units @ $4,800
2. Units in ending inventory
Units available (from part 1) ……………………….
3.
Periodic Inventory
Ending
Inventory
Cost of
Goods Sold
a. FIFO
(5 x $4,800)……………………………………………………….
$24,000.00
(20x$3,000)+(30x$3,500)+(5x$4,500)+(5x$4,800) …
(5 x $3,000)………………………………………………………
$15,000.00
(5 x $3,623.08)…………………………………………………..
$18,115.40
(5 x $4,500)……………………………………………………….
$22,500.00
Problem 5-1B (Concluded)
4.
FIFO
LIFO
Weighted
Average
Specific
Identifi-
cation
Sales* ………………………………..
$770,000
$770,000
$770,000.00
$770,000
Problem 5-2BA (40 minutes)
1. Compute cost of goods available for sale and units available for sale
Beginning inventory ………………………
20 units @ $3,000
$ 60,000
April 6 …………………………………………..
30 units @ $3,500
105,000
April 17 ………………………………………….
April 25 ………………………………………….
10 units @ $4,800
Units available ……………………………….
2. Units in ending inventory
Units available (from part 1) ……………………….
65 units
60 units
3a. FIFO perpetual
Date
Goods Purchased
Cost of Goods Sold
Inventory Balance
Apr. 1
20 @ $3,000.00 = $ 60,000.00
Apr. 6
Apr. 17
5 @ $4,500.00
30 @ $3,500.00
20 @ $3,000.00
Problem 5-2BA (Continued)
3b. LIFO perpetual
Date
Goods Purchased
Cost of Goods Sold
Inventory Balance
Apr. 1
20 @ $3,000.00 = $ 60,000.00
Apr. 6
Apr. 17
5 @ $4,500.00
30 @ $3,500.00
20 @ $3,000.00
Problem 5-2BA (Continued)
3c. Weighted Average perpetual
Date
Goods Purchased
Cost of Goods Sold
Inventory Balance
Apr. 1
20 @ $3,000.00 = $ 60,000.00
Apr. 6
30 @ $3,500.00
= $105,000.00
20 @ $3,000.00
30 @ $3,500.00 = $165,000.00
Apr. 9
15 @ $3,300.00 = $ 49,500.00
Apr. 17
5 @ $4,500.00
= $ 22,500.00
Apr. 25
10 @ $4,800.00
Problem 5-2BA (Concluded)
3d. Specific Identification
Date
Goods Purchased
Cost of Goods Sold
Inventory Balance
Apr. 1
20 @ $3,000.00 = $ 60,000.00
Apr. 6
10 @ $4,800.00 = $117,000.00
30 @ $3,500.00
20 @ $3,000.00
Specific identification—Alternative Computation
Cost of goods sold—20 [8+12] units from beginning inventory, 30 [27+3] units from
April 6 purchase, and 10 units from April 25 purchase
4.
FIFO
LIFO
Weighted
Average
Specific
Identification
Sales* ………………………………..
$770,000
$770,000
$770,000
$770,000
Problem 5-3B (40 minutes)
1. Compute cost of goods available for sale and units available for sale
Beginning inventory ………………………
150 units @ $300
$ 45,000
350 units @ $350
100 units @ $458
Units available ……………………………….
2. Units in ending inventory
Units available (from part 1) ……………………….
Problem 5-3B (Concluded)
3.
Periodic Inventory
Ending
Inventory
Cost of
Goods Sold
a. FIFO
(100 x $458.00) + (80 x $450.00) + (20 x $350.00) ..
$88,800.00
(150 x $300.00) + (330 x $350.00) ……………………….
(150 x $300.00) + (50 x $350.00) ………………………..
$62,500.00
(200 x $366.62) …………………………………………………
$73,324.00
(70x$300)+(50x$350)+(80x$450)+(0x$458) …………
$74,500.00
4.
FIFO
LIFO
Weighted
Average
Specific
Identifi-
cation
Sales* ………………………………..
$636,000
$636,000
$636,000
$636,000
Problem 5-4BA (40 minutes)
1. Compute cost of goods available for sale and units available for sale
Beginning inventory ………………………
150 units @ $300
$ 45,000
350 units @ $350
100 units @ $458
Units available ……………………………….
2. Units in ending inventory
Units available (from part 1) ……………………….
3a. FIFO perpetual
Date
Goods Purchased
Cost of Goods Sold
Inventory Balance
May 1
150 @ $300 = $ 45,000
Problem 5-4BA (Continued)
3b. LIFO perpetual
Date
Goods Purchased
Cost of Goods Sold
Inventory Balance
May 1
150 @ $300 = $ 45,000
May 6
350 @ $350 = $122,500
350 @ $350 = $167,500
May 9
150 @ $300
170 @ $350 = $104,500
170 @ $350
100 @ $458 = $186,300
150 @ $300
3c. Weighted Average perpetual
Date
Goods Purchased
Cost of Goods Sold
Inventory Balance
May 1
150 @ $300 = $ 45,000
May 6
350 @ $350 = $122,500
150 @ $300
350 @ $350 = $167,500
May 17
320 @ $335
May 25
100 @ $458 = $ 45,800
100 @ $458 = $189,000
200 @ $378 = $ 75,600
Problem 5-4BA (Continued)
3d. Specific Identification
Date
Goods Purchased
Cost of Goods Sold
Inventory Balance
May 1
150 @ $300 = $ 45,000
May 6
350 @ $350 = $122,500
250 @ $350 = $108,500
150 @ $300
Specific identification—Alternative Computation
Cost of goods sold—80 units from beginning inventory, 300 [100+200] units from May
6 purchase, and 100 units from May 25 purchase
Ending Cost of
Specific Identification Inventory Goods Sold
Problem 5-4BA (Continued)
4.
FIFO
LIFO
Weighted
Average
Specific
Identifi-
cation
Sales* ………………………………..
$636,000
$636,000
$636,000
$636,000
5. The manager of Aloha Company likely will prefer the FIFO method
Problem 5-5B (50 minutes)
Per Unit
Total
Total
LCM Applied
Inventory Items
Units
Cost
Market
Cost
Market
to Items
Office furniture
Desks ………………..
536
$261
$305
$139,896
$163,480
$139,896
Credenzas …………
395
227
256
89,665
101,120
89,665
Chairs ………………..
687
33,663
29,541
Two–drawer ……….
114
9,234
Four–drawer ………
298
135
122
40,230
36,356
Lateral ……………….
104
118
Fax machines ……
370
168
200
62,160
62,160
Copiers ……………..
475
317
288
136,800
Problem 5-6B (35 minutes)
Part 1
(a)
Cost of goods sold
2015
2016
2017
Reported ……………………………..
$ 207,200
$ 213,800
$ 197,030
Adjustments: 12/31/2015 error
+ 18,000
– 18,000
+ 26,000
Corrected …………………………….
$ 225,200
$ 169,800
$ 223,030
Net income
2015
2016
2017
Reported ……………………………..
$ 175,800
$ 212,270
$ 184,910
Adjustments: 12/31/2015 error
+ 26,000
Corrected …………………………….
$ 157,800
$ 256,270
$ 158,910
(c)
Total current assets
2015
2016
2017
Reported ……………………………..
$ 276,000
$ 277,500
$ 272,950
Adjustments: 12/31/2015 error
+ 26,000
Corrected …………………………….
$ 258,000
$ 303,500
$ 272,950
2015
2016
2017
Reported …………………………………….
$ 314,000
$ 315,000
$ 346,000
Adjustments: 12/31/2015 error
+ 26,000
Part 2
Total net income for the combined three-year period ($572,980) is not affected by
Part 3
The overstatement of inventory by $18,000 results in an understatement of cost of
Problem 5-7B (25 minutes)
Part 1
Number and total cost of units available for sale
6,500 units in beginning inventory @ $35 ………………………..
$ 227,500
11,500 units purchased @ $33 ………………………………………….
11,000 units purchased @ $29 ………………………………………….
7,600 units purchased @ $27 ………………………………………….
Part 2
a. FIFO periodic
Total cost of 50,000 units available for sale…….
$1,560,000
Less ending inventory on a FIFO basis
$205,200
b. LIFO periodic
Total cost of 50,000 units available for sale…….
$1,560,000
Less ending inventory on a LIFO basis
$227,500
c. Weighted average periodic
Total cost of 50,000 units available for sale…….
$1,560,000
Less ending inventory at weighted average cost
Problem 5-8B (30 minutes)
Part 1
SHEPARD COMPANY
Income Statements Comparing FIFO, LIFO, and Weighted Average
For Year Ended December 31, 2016
FIFO
LIFO
Weighted
Average
Sales ……………………………………………………..
$400,000
$400,000
$400,000
Cost of goods sold
Inventory, Dec. 31, 2015 ………………………..
48,720
48,720
48,720
Cost of purchases…………………………………
261,280
261,280
261,280
Inventory, Dec. 31, 2016 ………………………..
65,000
58,160
62,000
Cost of goods sold ……………………………….
245,000
251,840
248,000
60,000
60,000
60,000
88,160
92,000
38,000
35,264
36,800
Supporting calculations
FIFO
LIFO
Weighted
Average
Dec. 31, 2015, inventory (840 x $58) ………………
$ 48,720
$ 48,720
$ 48,720
Purchases
600 x $59 = $ 35,400
1,205 x $61 = 73,505
700 x $64 = 44,800
1,655 x $65 = 107,575
Total cost of goods available
$310,000
$310,000
Dec. 31, 2016, inventory
$ 65,000
$ 62,000
Problem 5-8B (Concluded)
Part 2
If Shepard Company had been experiencing decreasing costs in the
Part 3
Advantages
LIFO: Assuming a trend of increasing costs, the advantage of using LIFO is
Disadvantages
LIFO: Assuming a trend of increasing costs, the disadvantage of using