Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 5
363
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.
Specifically:
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,
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 5
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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
Less: Sales returns ………………………………………
Net sales ………………………………………………………..
Part 2
Estimated physical inventory at cost: $1,686,900 x 52.6% = $887,309
ALASKA COMPANY
Inventory Shortage
December 31
At Cost
At Retail
Estimated inventory (from part 1) ……………………….
$ 924,182
$ 1,757,000
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Problem 5-10AB (25 minutes)
WAYWARD COMPANY
Estimated Inventory at March 31
Goods available for sale
Beginning inventory, Jan. 1 …………………………..
$ 302,580
Cost of goods purchased ………………………………..
941,040
Goods available for sale ………………………………….
Less estimated cost of goods sold
Sales …………………………..………………………………….
Net sales ……………………………………………………….
[$1,202,750 x (1 – 34%)] …………………………..….
Estimated March 31 inventory …………………………..
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 5
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) ……………………….
65 units
60 units
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 5
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Problem 5-1B (Continued)
3a. FIFO 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. 17
5 @ $4,500.00
= $ 22,500.00
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 5
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Problem 5-1B (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
30 @ $3,500.00 = $165,000.00
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 5
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Problem 5-1B (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
(avg. = $3,300.00)
Apr. 17
5 @ $4,500.00
= $ 22,500.00
(avg. = $4,000.00)
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 5
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Problem 5-1B (Concluded)
3d. Specific Identification
Cost of goods sold— 20 [8 + 12] units from beginning inventory
4.
FIFO
LIFO
Weighted
Average
Specific
Identification
Sales* …………………………………
$770,000
$770,000
$770,000
$770,000
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 5
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Problem 5-2B (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
April 17 …………………………………………
April 25 …………………………………………
10 units @ $4,800
Units available ………………………………
2. Units in ending inventory
Units available (from part 1) ……………………….
65 units
60 units
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) …..
$211,500.00
(5 x $3,000)…………………………………………………………
$15,000.00
c. Weighted average ($235,500/65=$3,623.08 [rounded])
(5 x $3,623.08)…………………………………………………….
$18,115.40
d. Specific identification
(5 x $4,500)…………………………………………………………
$22,500.00
$235,500 [Goods Available] – $22,500 [Ending Inventory] ………….
$213,000.00
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Problem 5-2B (Concluded)
4.
FIFO
LIFO
Weighted
Average
Specific
Identifi-
cation
Sales* …………………………………
$770,000
$770,000
$770,000.00
$770,000
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 5
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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) ……………………….
3a. FIFO 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
80 @ $450 = $ 36,000
320 @ $350
100 @ $458 = $ 88,800
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Problem 5-3B (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
150 @ $300
350 @ $350 = $167,500
May 9
180 @ $350 = $ 63,000
150 @ $300
170 @ $350 = $104,500
170 @ $350
100 @ $458 = $186,300
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Problem 5-3B (Continued)
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
(avg. = $335)
May 17
320 @ $335
100 @ $458 = $189,000
May 30
300 @ $378 = $113,400
200 @ $378 = $ 75,600
(avg. = $378)
$173,700
3d. Specific Identification
Cost of goods sold— 80 units from beginning inventory
300 [100 + 200] units from May 6 purchase
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 5
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Problem 5-3B (Continued)
4.
FIFO
LIFO
Weighted
Average
Specific
Identifi-
cation
Sales* ………………………………..
$636,000
$636,000
$636,000
$636,000
5. FIFO. The manager of Aloha Company likely will prefer the FIFO method
Problem 5-4B (40 minutes)
1. Compute cost of goods available for sale and units available for sale
Beginning inventory ……………………..
150 units @ $300
$ 45,000
May 6 …………………………………………..
350 units @ $350
122,500
May 17 ………………………………………….
Units available ………………………………
2. Units in ending inventory
Units available (from part 1) ……………………….
680 units
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 5
Problem 5-4B (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) …………………………
$160,500.00
(150 x $300.00) + (50 x $350.00) …………………………..
$62,500.00
c. Weighted average ($249,300/680=$366.62 [rounded])
(200 x $366.62) …………………………………………………..
$73,324.00
(70 x $300)+(50 x $350)+(80 x $450)+(0 x $458) …….
$74,500.00
4.
FIFO
LIFO
Weighted
Average
Specific
Identifi-
cation
Sales* ………………………………..
$636,000
$636,000
$636,000
$636,000
5. FIFO. The manager likely will prefer the FIFO method because it would
yield the largest gross profit (in this period of rising costs). This would
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 5
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
Chairs ………………….
395
227
256
89,665
89,665
Mats …………………….
687
33,663
29,541
29,541
Two–drawer …………
114
9,234
Four–drawer ………..
298
135
122
40,230
36,356
36,356
Lateral …………………
104
118
Office equipment
Projectors ……………
370
168
200
62,160
74,000
62,160
Copiers ……………….
475
317
288
Phones ………………..
302
125
117
1. Lower of cost or market for inventory applied separately = $580,054
2.
Dec 31
Cost of Goods Sold ……………………………………………..
30,072
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Problem 5-6B (35 minutes)
Part 1
(a)
Cost of goods sold
Year 1
Year 2
Year 3
Reported ……………………………………
$ 207,200
$ 213,800
$ 197,030
Adjustments: 12/31/Year 1 error ……
+ 18,000
– 18,000
12/31/Year 2 error ……
________
– 26,000
+ 26,000
Corrected …………………………………..
$ 225,200
$ 169,800
$ 223,030
(b)
Net income
Year 1
Year 2
Year 3
Reported ……………………………………
$ 175,800
$ 212,270
$ 184,910
Adjustments: 12/31/Year 1 error ……
– 18,000
________
+ 26,000
– 26,000
Corrected …………………………………..
$ 157,800
$ 256,270
$ 158,910
(c)
Total current assets
Year 1
Year 2
Year 3
Reported ……………………………………
$ 276,000
$ 277,500
$ 272,950
Adjustments: 12/31/Year 1 error ……
________
+ 26,000
________
Corrected …………………………………..
$ 258,000
$ 303,500
$ 272,950
(d)
Equity
Year 1
Year 2
Year 3
Reported ……………………………………
$ 314,000
$ 315,000
$ 346,000
Adjustments: 12/31/Year 1 error ……
– 18,000
12/31/Year 2 error ……
________
+ 26,000
________
Corrected …………………………………..
$ 296,000
$ 341,000
$ 346,000
Part 2
Zero (there is no error in combined net income).
380
Problem 5-7BA (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