Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 5
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Problem 5-6A (35 minutes)
Part 1
(a)
Cost of goods sold
Year 1
Year 2
Year 3
Reported …………………………………….
$ 615,000
$ 957,000
$ 780,000
Adjustments: 12/31/Year 1 error ………
– 56,000
+ 56,000
12/31/Year 2 error ………
.
+ 20,000
– 20,000
Corrected ……………………………………
$ 559,000
$1,033,000
$ 760,000
(b)
Net income
Year 1
Year 2
Year 3
Reported …………………………………….
$ 230,000
$ 285,000
$ 241,000
Adjustments: 12/31/Year 1 error ………
+ 56,000
12/31/Year 2 error ………
.
– 20,000
+ 20,000
Corrected ……………………………………
$ 286,000
$ 209,000
$ 261,000
(c)
Total current assets
Year 1
Year 2
Year 3
Reported …………………………………….
$1,255,000
$1,365,000
$1,200,000
Adjustments: 12/31/Year 1 error ………
+ 56,000
.
– 20,000
Corrected ……………………………………
$1,311,000
$1,345,000
$1,200,000
(d)
Equity
Year 1
Year 2
Year 3
Reported …………………………………….
$1,387,000
$1,530,000
$1,242,000
Adjustments: 12/31/Year 1 error ………
+ 56,000
_________
– 20,000
Part 2
Zero (there is no error in combined net income).
420
Problem 5-7AA (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
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 5
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Problem 5-8AA (50 minutes)
Part 1
QP CORP.
Income Statements Comparing FIFO, LIFO, and Weighted Average
For Year Ended December 31
FIFO
LIFO
Weighted
Average
Sales …………………………………………………
$200,000
$200,000
$200,000
Cost of goods sold
Beginning inventory, Jan. 1 ………………
12,600
12,600
12,600
Cost of purchases …………………………….
109,400
109,400
109,400
Cost of goods available for sale ………..
44,000
37,300
40,660
20,000
20,000
20,000
Supporting calculations
FIFO
LIFO
Weighted
Average
Beginning inventory, Jan. 1 (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
Ending inventory, Dec. 31 (6,000-4,000=2,000 units)
(700 x $18) + (1,300 x $19)
($122,000/ 6,000 = $20.33) x 2,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 5
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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:
• LIFO would have resulted in a higher ending inventory, lower cost of
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
423
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 ……………………………..
3,376,050
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
Physical inventory ………………………………………
$ 36,873
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 5
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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 …………………………...
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 and Managerial Accounting 9e Solutions Manual: Chapter 5
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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
April 17 …………………………………………
April 25 …………………………………………
10 units @ $4,800
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 = $ 60,000
Apr. 6
30 @ $3,500= $105,000
Apr. 9
15 @ $3,500 = $ 52,500
15 @ $3,500
20 @ $3,000
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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 = $ 60,000
Apr. 6
30 @ $3,500= $105,000
30 @ $3,500 = $165,000
15 @ $3,000 = $ 45,000
10 @ $4,800 = $115,500
20 @ $3,000
3c. Weighted Average perpetual
Date
Goods Purchased
Cost of Goods Sold
Inventory Balance
Apr. 1
20 @ $3,000 = $ 60,000
Apr. 6
30 @ $3,500= $105,000
20 @ $3,000
30 @ $3,500 = $165,000
(avg. = $3,300)
15 @ $3,300 = $ 49,500
15 @ $3,300
(avg. = $4,000)
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 5
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Problem 5-1B (Concluded)
3d. Specific Identification
Date
Goods Available for Sale
Cost of Goods Sold
Ending Inventory
Apr. 1
20 @ $3,000 = $ 60,000
20 @ $3,000 = $ 60,000
Apr. 6
30 @ $3,500 = $105,000
30 @ $3,500 = $105,000
Apr. 17
4.
FIFO
LIFO
Weighted
Average
Specific
Identification
Sales* ……………………………..
$770,000
$770,000
$770,000
$770,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 5
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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
April 17 …………………………………………
April 25 …………………………………………
10 units @ $4,800
Units available ……………………………..
2. Units in ending inventory
Units available (from part 1) ………….
65 units
3.
a. FIFO—Periodic
Date
Goods Available for Sale
Cost of Goods Sold
Ending Inventory
Apr. 1
20 @ $3,000 = $ 60,000
20 @ $3,000 = $ 60,000
Apr. 6
30 @ $3,500 = $105,000
30 @ $3,500 = $105,000
Apr. 25
b. LIFO—Periodic
Date
Goods Available for Sale
Cost of Goods Sold
Ending Inventory
Apr. 1
20 @ $3,000 = $ 60,000
15 @ $3,000 = $ 45,000
5 @ $3,000 = $15,000
Apr. 6
30 @ $3,500 = $105,000
30 @ $3,500 = $105,000
Apr. 17
Apr. 25
10 @ $4,800 = $ 48,000
Total
429
Problem 5-2BA (Concluded)
c. Weighted Average—Periodic
Date
Goods Available for Sale
Cost of Goods Sold
Ending Inventory
Apr. 1
20 @ $3,000 = $ 60,000
Apr. 6
30 @ $3,500 = $105,000
Apr. 17
Apr. 25
d. Specific Identification
Date
Goods Available for Sale
Cost of Goods Sold
Ending Inventory
Apr. 1
20 @ $3,000 = $ 60,000
20 @ $3,000 = $ 60,000
Apr. 6
30 @ $3,500 = $105,000
30 @ $3,500 = $105,000
Apr. 25
10 @ $4,800 = $ 48,000
10 @ $4,800 = $ 48,000
Total
4.
FIFO
LIFO
Weighted
Average
Specific
Identifi-
cation
Sales* ………………………………..
$770,000
$770,000
$770,000.00
$770,000
Wild and Shaw Financial and Managerial Accounting 9e 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
May 6 …………………………………………..
350 units @ $350
122,500
May 17 ………………………………………….
May 25 ………………………………………….
100 units @ $458
Units available ……………………………..
2. Units in ending inventory
Units available (from part 1) ………….
680 units
Less: Units sold (180 + 300) ………….
480 units
3a. FIFO perpetual
Date
Goods Purchased
Cost of Goods Sold
Inventory Balance
May 1
150 @ $300 = $ 45,000
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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
100 @ $458 = $186,300
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
(avg. = $335)
(avg. = $335)
May 17
320 @ $335
(avg. = $358)
May 25
100 @ $458 = $ 45,800
100 @ $458 = $189,000
(avg. = $378)
200 @ $378 = $ 75,600
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 5
Problem 5-3B (Continued)
3d. Specific Identification
Date
Goods Available for Sale
Cost of Goods Sold
Ending Inventory
May 1
150 @ $300 = $ 45,000
80 @ $300 = $ 24,000
70 @ $300 = $21,000
May 6
350 @ $350 = $122,500
300 @ $350 = $105,000
50 @ $350 = $17,500
May 17
80 @ $450 = $ 36,000
80 @ $450 = $36,000
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
because it would yield the largest gross profit (in this period of
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 5
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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) ………….
3.
a. FIFO—Periodic
Date
Goods Available for Sale
Cost of Goods Sold
Ending Inventory
May 1
150 @ $300 = $ 45,000
150 @ $300 = $ 45,000
May 17
Total
b. LIFO—Periodic
Date
Goods Available for Sale
Cost of Goods Sold
Ending Inventory
May 1
150 @ $300 = $ 45,000
150 @ $300 = $45,000
Total
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Problem 5-4BA (Concluded)
c. Weighted Average—Periodic
Date
Goods Available for Sale
Cost of Goods Sold
Ending Inventory
May 1
150 @ $300 = $ 45,000
May 6
350 @ $350 = $122,500
May 17
80 @ $450 = $ 36,000
May 25
d. Specific Identification
Date
Goods Available for Sale
Cost of Goods Sold
Ending Inventory
May 1
150 @ $300 = $ 45,000
80 @ $300 = $ 24,000
70 @ $300 = $ 21,000
May 6
350 @ $350 = $122,500
300 @ $350 = $105,000
50 @ $350 = $ 17,500
May 17
80 @ $450 = $ 36,000
80 @ $450 = $ 36,000
May 25
100 @ $458 = $ 45,800
100 @ $458 = $ 45,800
______
Total
$174,800
$74,500
4.
FIFO
LIFO
Weighted
Average
Specific
Identifi-
cation
Sales* ………………………………..
$636,000
$636,000
$636,000.00
$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 give the manager the highest bonus based on gross profit.
Wild and Shaw Financial and Managerial Accounting 9e 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
101,120
89,665
Mats …………………….
687
33,663
29,541
Two–drawer …………
114
9,234
Four–drawer ………..
298
135
122
40,230
36,356
Lateral …………………
104
118
Projectors ……………
370
168
200
62,160
62,160
Copiers………………..
475
317
288
136,800
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
Net income
Year 1
Year 2
Year 3
Reported …………………………………….
$ 175,800
$ 212,270
$ 184,910
Adjustments: 12/31/Year 1 error…….
12/31/Year 2 error…….
________
+ 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…….
– 18,000
12/31/Year 2 error…….
________
+ 26,000
________
Corrected …………………………………..
$ 258,000
$ 303,500
$ 272,950
Year 1
Year 2
Year 3
Reported …………………………………….
$ 314,000
$ 315,000
$ 346,000
Adjustments: 12/31/Year 1 error…….
________
+ 26,000
________
Part 2
Zero (there is no error in combined net income).
Explanation: Total net income for the combined three-year period ($572,980) is not
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 5
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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 ………………………………………….
379,500
11,000 units purchased @ $29 ………………………………………….
319,000
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