Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 5
Exercise 5-12 (20 minutes)
Jan. 3 Accounts Receivable ………………………………………… 240
Sales …………………………………………………………. 240
Record sale of goods. (30 x $8)
Jan. 3 Cost of Goods Sold …………………………………………… 60
Record cost of sale. (60 x $3)
Jun. 30 Merchandise Inventory ………………………………………. 360
Accounts Payable ………………………………………. 360
Record purchase of inventory. (90 x $4)
Nov. 6 Accounts Receivable ………………………………………… 688
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Exercise 5-13A (20 minutes)
a. FIFO—Periodic
Date
Goods Available for Sale
Cost of Goods Sold
Ending Inventory
Jan. 1
40 @ $2 = $ 80
40 @ $2 = $ 80
Feb. 14
70 @ $3 = $210
70 @ $3 = $210
Jun. 30
90 @ $4 = $360
66 @ $4 = $264
Nov. 19
20 @ $5 = $100
20 @ $5 = $100
Total
b. LIFO—Periodic
Date
Goods Available for Sale
Cost of Goods Sold
Ending Inventory
Jan. 1
40 @ $2 = $ 80
40 @ $2 = $ 80
Feb. 14
70 @ $3 = $210
66 @ $3 = $198
Jun. 30
90 @ $4 = $360
90 @ $4 = $360
Nov. 19
20 @ $5 = $100
20 @ $5 = $100
Total
c.
FIFO
LIFO
Sales*
$1,408
$1,408
Less: Cost of Goods Sold
Gross Profit
$ 854
$ 750
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Exercise 5-14A (20 minutes)
Periodic Inventory
Ending
Inventory
Cost of
Goods Sold
a. Specific identification
(50 x $2.90) + (50 x $2.80) + (50 x $2.50) ………….
$410.00
$3,855 [Goods Available] – $410.00 [Ending Inventory] …………
$3,445.00
b. Weighted average ($3,855/1,500 = $2.57)
150 x $2.57 [rounded to cents] ………………………………….
385.50
$3,855 [Goods Available] – $385.50 [Ending Inventory] …………
d. LIFO
(96 x $2.00) + (54 x $2.25) ………………………………
313.50
(160 x $2.90) + (480 x $2.80) + (544 x $2.50) +
(166 x $2.25) ……………………………………………..
3,541.50
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Exercise 5-15A (20 minutes)
Periodic Inventory
Ending
Inventory
Cost of
Goods Sold
a. Specific Identification
(50 x $2.80) + (10 x $2.00) ………………………………
$160.00
$2,540.00 [Goods Available] – $160.00 [Ending Inventory] …….
$2,380.00
(60 x $2.54) ……………………………………………………
$2,540.00 [Goods Available] – $152.40 [Ending Inventory] …….
(138 x $3.00) + (300 x $2.80) + (502 x $2.30) …….
(60 x $3.00) ……………………………………………………
e. FIFO: FIFO results in the highest cost of goods sold, which produces
the lowest gross profit and lowest net income. A lower income
from using FIFO is expected during a period of declining costs.
Exercise 5-16 (15 minutes)
Per Unit
Total
Total
LCM Applied
to Items
Inventory Items
Units
Cost
Market
Cost
Market
Helmets …….
24
$50
$54
$1,200
$1,296
$1,200
17
38
Uniforms ……
42
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 5
Exercise 5-17 (25 minutes)
2. Reported income figures
Year 1
Year 2
Year 3
Sales …………………………….
$850,000
$850,000
$850,000
Cost of goods sold
Beginning inventory……
$250,000
$230,000
$250,000
Exercise 5-18 (20 minutes)
1. a. LIFO ratio computations
LIFO current ratio (Year 2) = $220/$200 = 1.1
2. The use of LIFO versus FIFO for Cruz markedly impacts the ratios computed.
Specifically, LIFO makes Cruz appear worse in comparison to FIFO numbers on
the current ratio (1.1 vs. 1.5) but better on inventory turnover (5.5 vs. 3.8) and
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Exercise 5-19 (20 minutes)
Inventory Turnover
Year 2— $426,650/[($92,500 + $87,750)/2] = 4.7 times
Year 3— $643,825/[($87,750 + $97,400)/2] = 7.0 times
Exercise 5-20B (20 minutes)
At Cost
At Retail
Goods available for sale
Beginning inventory ………………………………………..
$ 63,800
$128,400
Cost of goods purchased ………………………………..
115,060
196,800
Goods available for sale ………………………………….
$178,860
260,000
$ 65,200
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 5
Exercise 5-21B (20 minutes)
Goods available for sale
Beginning inventory, January 1 ……………………….
$ 225,000
Net cost of goods purchased* ………………………….
802,250
Net sales …………………………..…………………………….
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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
$ 5,000
March 5
400 units @ $55
March 18 ………………………………………
120 units @ $60
March 25 ………………………………………
200 units @ $62
Units available ……………………………..
2. Units in ending inventory
Units available (from part 1) ………….
820 units
Less: Units sold (420 + 160) ………….
580 units
Ending Inventory (units) ……………….
240 units
3a. FIFO perpetual
Date
Goods Purchased
Cost of Goods Sold
Inventory Balance
Mar. 1
100 @ $50 = $ 5,000
Mar. 5
400 @ $55 = $22,000
100 @ $50
400 @ $55 = $27,000
120 @ $60
200 @ $62 = $24,000
Mar. 29
200 @ $62 = $14,800
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 5
Problem 5-1A (Continued)
3b. LIFO perpetual
Date
Goods Purchased
Cost of Goods Sold
Inventory Balance
Mar. 1
100 @ $50 = $ 5,000
Mar. 5
400@ $55 = $22,000
100 @ $50
400 @ $55 = $27,000
Mar. 9
120 @ $60
200 @ $62 = $23,600
Mar. 29
120 @ $60
3c. Weighted Average perpetual
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
(avg. = $54.00)
(avg. = $54.00)
120 @ $60.00 = $11,520
Mar. 25
200@ $62.00= $12,400
200 @ $62.00 = $23,920
(avg. = $59.80)
240 @ $59.80 = $14,352
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Problem 5-1A (Concluded)
3d. Specific Identification
Date
Goods Available for Sale
Cost of Goods Sold
Ending Inventory
Mar. 1
100 @ $50 = $ 5,000
80 @ $50 = $ 4,000
20 @ $50 = $ 1,000
Mar. 25
200 @ $62 = $12,400
120 @ $62 = $ 7,440
80 @ $62 = $ 4,960
Total
4.
FIFO
LIFO
Weighted
Average
Specific
Identifi-
cation
Sales* ………………………………
$50,900
$50,900
$50,900
$50,900
$ 18,360
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Problem 5-2AA (40 minutes)
1. Compute cost of goods available for sale and units available for sale
Beginning inventory ……………………..
100 units @ $50
$ 5,000
March 5 ……………………………………….
400 units @ $55
22,000
March 18 ………………………………………
120 units @ $60
March 25 ………………………………………
200 units @ $62
2. Units in ending inventory
Less: Units sold (420 + 160) ………….
3.
a. FIFO—Periodic
Date
Goods Available for Sale
Cost of Goods Sold
Ending Inventory
Mar. 1
100 @ $50 = $ 5,000
100 @ $50 = $ 5,000
Mar. 5
400 @ $55 = $22,000
400 @ $55 = $22,000
Mar. 18
120 @ $60 = $ 7,200
Mar. 25
200 @ $62 = $12,400
Total
b. LIFO—Periodic
Date
Goods Available for Sale
Cost of Goods Sold
Ending Inventory
Mar. 1
100 @ $50 = $ 5,000
100 @ $50 = $ 5,000
Mar. 18
120 @ $60 = $ 7,200
120 @ $60 = $ 7,200
Mar. 25
200 @ $62 = $12,400
200 @ $62 = $12,400
Total
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Problem 5-2AA (Concluded)
c. Weighted Average—Periodic
Date
Goods Available for Sale
Cost of Goods Sold
Ending Inventory
Mar. 1
100 @ $50 = $ 5,000
Mar. 5
400 @ $55 = $22,000
Mar. 18
120 @ $60 = $ 7,200
Mar. 25
200 @ $62 = $12,400
d. Specific Identification
Date
Goods Available for Sale
Cost of Goods Sold
Ending Inventory
Mar. 1
100 @ $50 = $ 5,000
80 @ $50 = $ 4,000
20 @ $50 = $ 1,000
Mar. 5
400 @ $55 = $22,000
60 @ $55 = $ 3,300
4.
FIFO
LIFO
Weighted
Average
Specific
Identifi-
cation
Sales* ……………………………….
$50,900.00
$50,900.00
$50,900.00
$50,900.00
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Problem 5-3A (40 minutes)
1. Calculate cost of goods available for sale and units available for sale
Beginning inventory ………………………
600 units @ $45
$27,000
Feb. 10 ………………………………………..
400 units @ $42
16,800
200 units @ $27
Aug. 21 ………………………………………..
100 units @ $50
2. Units in ending inventory
Units available (from part 1) ……………
1,800
1,400
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Problem 5-3A (Continued)
3a. FIFO—perpetual
Date
Goods Purchased
Cost of Goods Sold
Inventory Balance
1/1
600 @ $45 = $27,000
2/10
400 @ $42 = $16,800
600 @ $45
400 @ $42 = $43,800
3/13
200 @ $27 = $ 5,400
200 @ $27
200 @ $42 = $35,400
200 @ $27 = $13,800
8/21
100 @ $50 = $ 5,000
200 @ $42
200 @ $27 = $18,800
100 @ $50
200 @ $27
100 @ $50
500 @ $46 = $41,800
100 @ $50
100 @ $46 = $23,400
600 @ $45
400 @ $42 = $49,200
FIFO Alternate Solution Format
Cost of goods available for sale
$77,200
Less: Cost of sales
600 @ $45
$27,000
400 @ $42
16,800
200 @ $27
100 @ $50
100 @ $46
Total cost of goods sold
Ending Inventory
$18,400
Proof of Ending Inventory
$18,400
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Problem 5-3A (Continued)
3b. LIFO—perpetual
Date
Goods Purchased
Cost of Goods Sold
Inventory Balance
1/1
600 @ $45 = $27,000
2/10
400 @ $42 = $16,800
600 @ $45
400 @ $42 = $43,800
400 @ $42 = $49,200
200 @ $27
200 @ $45 = $31,200
100 @ $50 = $ 5,000
400 @ $45
100 @ $50 = $23,000
100 @ $50
500 @ $46 = $46,000
500 @ $46
100 @ $50 = $28,000
LIFO alternate solution format
Cost of goods available for sale
$77,200
Less: Cost of sales
500 @ $46
$23,000
100 @ 50
5,000
200 @ 27
5,400
400 @ 42
200 @ 45
Cost of Goods Sold
Ending Inventory
$18,000
Proof of Ending Inventory
414
Problem 5-3A (Continued)
3c. Weighted Average—perpetual
Date
Goods Purchased
Cost of Goods Sold
Inventory Balance
1/1
600 @ $45.00 = $27,000
2/10
400 @ $42.00= $16,800
600 @ $45.00
400 @ $42.00 = $43,800
(avg. cost is $43.80)
3/13
200 @ $27.00= $ 5,400
1,000 @ $43.80 = $49,200
(avg. cost is $41.00)
3/15
800 @ $41.00 = $32,800
400 @ $41.00 = $16,400
8/21
100 @ $50.00= $ 5,000
400 @ $41.00
100 @ $50.00 = $21,400
(avg. cost is $42.80)
9/5
500 @ $46.00= $23,000
500 @ $42.80
500 @ $46.00 = $44,400
(avg. cost is $44.40)
3d. Specific Identification
Date
Goods Available for Sale
Cost of Goods Sold
Ending Inventory
Jan. 1
600 @ $45 = $27,000
600 @ $45 = $27,000
Feb. 10
400 @ $42 = $16,800
300 @ $42 = $12,600
100 @ $42 = $ 4,200
Aug. 21
100 @ $50 = $ 5,000
Sep. 5
500 @ $46 = $23,000
250 @ $46 = $11,500
250 @ $46 = $11,500
Total
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Problem 5-3A (Continued)
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. FIFO. Montoure’s manager would prefer the FIFO method since this
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Problem 5-4AA (40 minutes)
1. Calculate cost of goods available for sale and units available for sale
Beginning inventory ……………………..
600 units @ $45
$27,000
Feb. 10 ………………………………………..
400 units @ $42
16,800
200 units @ $27
Aug. 21 ………………………………………..
100 units @ $50
500 units @ $46
Units available ……………………………..
2. Units in ending inventory
Units available (from part 1) ………….
1,800
1,400
3.
a. FIFO—Periodic
Date
Goods Available for Sale
Cost of Goods Sold
Ending Inventory
Jan. 1
600 @ $45 = $27,000
600 @ $45 = $27,000
Feb. 10
400 @ $42 = $16,800
400 @ $42 = $16,800
Mar. 13
200 @ $27 = $ 5,400
200 @ $27 = $ 5,400
Aug. 21
100 @ $50 = $ 5,000
100 @ $50 = $ 5,000
Sep. 5
500 @ $46 = $23,000
100 @ $46 = $ 4,600
Total
b. LIFO—Periodic
Date
Goods Available for Sale
Cost of Goods Sold
Ending Inventory
Jan. 1
600 @ $45 = $27,000
200 @ $45 = $ 9,000
400 @ $45 = $18,000
Mar. 13
200 @ $27 = $ 5,400
200 @ $27 = $ 5,400
Sep. 5
500 @ $46 = $23,000
500 @ $46 = $23,000
Total
417
Problem 5-4AA (Concluded)
c. Weighted Average—Periodic
Date
Goods Available for Sale
Cost of Goods Sold
Ending Inventory
Jan. 1
600 @ $45 = $27,000
Feb. 10
400 @ $42 = $16,800
Mar. 13
200 @ $27 = $ 5,400
Aug. 21
100 @ $50 = $ 5,000
Sep. 5
d. Specific Identification
Date
Goods Available for Sale
Cost of Goods Sold
Ending Inventory
Jan. 1
600 @ $45 = $27,000
600 @ $45 = $27,000
Feb. 10
400 @ $42 = $16,800
300 @ $42 = $12,600
100 @ $42 = $ 4,200
Mar. 13
200 @ $27 = $ 5,400
200 @ $27 = $ 5,400
Aug. 21
100 @ $50 = $ 5,000
50 @ $50 = $ 2,500
Sep. 5
500 @ $46 = $23,000
250 @ $46 = $11,500
Total
4.
FIFO
LIFO
Weighted
Average
Specific
Identifi-
cation
Sales (1,400 x $75) ……………
$105,000
$105,000
$105,000
$105,000
5. FIFO. The manager would prefer the FIFO method since this methods’
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Problem 5-5A (50 minutes)
Per Unit
Total
Total
LCM Applied
to Items
Inventory Items
Units
Cost
Market
Cost
Market
Car audio equipment
Speakers ………………..
345
$ 90
$ 98
$ 31,050
$ 33,810
$ 31,050
Stereos …………………..
260
111
100
28,860
26,000
26,000
Amplifiers ………………
326
28,036
30,970
28,036
Subwoofers ……………
204
Security equipment
Alarms ……………………
480
150
125
72,000
60,000
60,000
Locks ……………………..
291
27,063
24,444
24,444
Cameras ………………..
212
310
322
65,720
Tripods …………………..
185
12,950
15,540
12,950
Stabilizers ………………
170
105
1. Lower of cost or market for inventory applied separately = $273,054
2.
Dec 31
Cost of Goods Sold ……………………………………….
19,723