387
Exercise 6-15A (20 minutes)
Periodic Inventory
Ending
Inventory
Cost of
Goods Sold
a. Specific Identification
(50 x $2.80) + (10 x $2.00) ……………………………….
$160.00
(60 x $2.54)…………………………………………………….
(22 x $2.00) + (38 x 2.30) …………………………………
(60 x $3.00)…………………………………………………….
Exercise 6-16B (20 minutes)
At Cost
At Retail
Goods available for sale
Beginning inventory ……………………………………………
$ 63,800
$128,400
Cost of goods purchased ……………………………………
Goods available for sale ……………………………………..
$178,860
$ 65,200
388
Exercise 6-17B (20 minutes)
Goods available for sale
Inventory, January 1 ……………………………………………..
$ 225,000
Net sales ……………………………………………………………….
Estimated cost of goods sold
Exercise 6-18 (15 minutes)
1. Samsung generally applies the (weighted) average cost assumption when
2. Under IFRS, Samsung would reverse inventory valuation losses if
inventory values increased in subsequent periods. Specifically, it would
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 6
389
PROBLEM SET A
Problem 6-1A (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
Units available (from part 1) ……………………….
3a. FIFO perpetual
Date
Goods Purchased
Cost of Goods Sold
Inventory Balance
Mar. 1
100 @ $50.00 = $5,000
320 @ $55.00 = $17,600
400 units @ $55.00
120 units @ $60.00
200 units @ $62.00
Units available ……………………………….
820 units
390
Problem 6-1A (Continued)
3b. LIFO perpetual
Date
Goods Purchased
Cost of Goods Sold
Inventory Balance
Mar. 1
100 @ $50.00 = $ 5,000
Mar. 5
400@ $55.00= $22,000
Mar. 9
400 @ $55.00 = $22,000
Mar. 18
120@ $60.00= $ 7,200
120 @ $60.00
Mar. 29
160 @ $62.00 = $ 9,920
120 @ $60.00
100 @ $50.00
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
391
Problem 6-1A (Concluded)
3d. Specific Identification
Cost of goods sold— 80 units from beginning inventory
340 units from March 5 purchase
4.
FIFO
LIFO
Weighted
Average
Specific
Identifi-
cation
Sales* ………………………………..
$50,900
$50,900
$50,900
$50,900
392
Problem 6-2A (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
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
(100 x $50.00) + (140 x $55.00) ……………………….
$12,700.00
c. Weighted average ($46,600/820 = $56.83)
(240 x $56.83) ………………………………………………..
$13,639.20
(20 x $50)+(60 x $55)+(80 x $60)+(80 x $62) ……..
$14,060.00
393
Problem 6-2A (Concluded)
4.
FIFO
LIFO
Weighted
Average
Specific
Identifi-
cation
Sales* ………………………………..
$50,900.00
$50,900.00
$50,900.00
$50,900.00
Less: Cost of goods sold ……
394
Problem 6-3A (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) ……………………….
1,800
395
Problem 6-3A (Continued)
3a. FIFO perpetual
Date
Goods Purchased
Cost of Goods Sold
Inventory Balance
1/1
600 @ $45.00 = $27,000
600 @ $45.00
3/13
200 @ $27.00= $ 5,400
600 @ $45.00
400 @ $42.00 = $49,200
200 @ $42.00 = $35,400
200 @ $27.00 = $13,800
8/21
100 @ $50.00= $ 5,000
200 @ $27.00
100 @ $50.00
200 @ $42.00
200 @ $27.00 = $18,800
FIFO Alternate Solution Format
Cost of goods available for sale
$77,200
Less: Cost of sales
600 @ $45.00
$27,000
400 @ $42.00
16,800
200 @ $27.00
100 @ $50.00
100 @ $46.00
Ending Inventory
$18,400
Proof of Ending Inventory
$18,400
396
Problem 6-3A (Continued)
3b. LIFO perpetual
Date
Goods Purchased
Cost of Goods Sold
Inventory Balance
1/1
600 @ $45.00 = $27,000
400 @ $42.00= $16,800
600 @ $45.00
400 @ $42.00 = $43,800
400 @ $42.00 = $49,200
200 @ $27.00
200 @ $45.00 = $31,200
8/21
100 @ $50.00= $ 5,000
400 @ $45.00
100 @ $50.00 = $23,000
100 @ $50.00
500 @ $46.00 = $46,000
9/10
500 @ $46.00
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
397
Problem 6-3A (Continued)
3c. Weighted Average
Date
Goods Purchased
Cost of Goods Sold
Inventory Balance
1/1
600 @ $45.00 = $27,000
2/10
400 @ $42.00= $16,800
8/21
100 @ $50.00= $ 5,000
400 @ $41.00
100 @ $50.00
600 @ $45.00
Problem 6-3A (Continued)
3d. Specific Identification
Cost of goods available for sale ……………….
$77,200
Less: Cost of Goods Sold
600 @ $45.00 ……………………………….
$27,000
300 @ $42.00 ……………………………….
200 @ $27.00 ……………………………….
250 @ $46.00 ……………………………….
Total cost of goods sold …………………………..
4.
FIFO
LIFO
Specific
Identifi-
cation
Weighted
Average
5. Montoure’s manager would likely prefer the FIFO method since this
1,400
Problem 6-4A (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) ……………………….
1,800
Problem 6-4A (Concluded)
3.
Periodic Inventory
Ending
Inventory
Cost of
Goods Sold
a. FIFO
(400 x $46.00)…………………………………………………….
$18,400.00
b. LIFO
(400 x $45.00)……………………………………………………
$18,000.00
c. Weighted average ($77,200/1,800 = $42.89 [rounded])
(400 x $42.89)…………………………………………………….
$17,156.00
d. Specific identification
(100 x $42.00) + (50 x $50.00) + (250 x $46.00) …….
$18,200.00
4.
FIFO
LIFO
Specific
Identifi-
cation
Weighted
Average
Sales (1,400 x $75) ……………..
$105,000
$105,000
$105,000
$105,000
5. The manager would likely prefer the FIFO method since this methods’
Problem 6-5A (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
Amplifiers ……………….
326
Subwoofers …………….
204
10,608
Security equipment:
Alarms …………………….
480
150
Locks………………………
291
Cameras …………………
212
310
65,720
68,264
Tripods ……………………
185
Stabilizers ……………….
170
16,490
17,850
2.
Dec 31
Cost of Goods Sold ……………………………………………..
19,723
402
Problem 6-6A (35 minutes)
Part 1
(a)
Cost of goods sold
2016
2017
2018
Reported …………………………………
$ 615,000
$ 957,000
$ 780,000
Adjustments: 12/31/2016 error ……
+ 20,000
– 20,000
Corrected ……………………………….
$ 559,000
$1,033,000
$ 760,000
Net income
2016
2017
2018
Reported …………………………………
$ 230,000
$ 285,000
$ 241,000
– 20,000
+ 20,000
Corrected ……………………………….
$ 286,000
$ 209,000
$ 261,000
(c)
Total current assets
2016
2017
2018
Reported …………………………………
$1,255,000
$1,365,000
$1,200,000
Adjustments: 12/31/2016 error ……
– 20,000
Corrected ……………………………….
$1,311,000
$1,345,000
$1,200,000
2016
2017
2018
Reported …………………………………
$1,387,000
$1,530,000
$1,242,000
Adjustments: 12/31/2016 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
403
Problem 6-7AA (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
404
Problem 6-8AA (50 minutes)
Part 1
QP CORP.
Income Statements Comparing FIFO, LIFO, and Weighted Average
For Year Ended December 31, 2017
FIFO
LIFO
Weighted
Average
Sales ……………………………………………………..
$200,000
$200,000
$200,000
Cost of goods sold
Inventory, Dec. 31, 2016 ………………………..
12,600
12,600
12,600
109,400
109,400
109,400
44,000
37,300
40,660
20,000
20,000
20,000
40,800
38,120
39,464
Supporting calculations
FIFO
LIFO
Weighted
Average
Dec. 31, 2016, 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, 2017, inventory (6,000-4,000=2,000 units)
(700 x $18) + (1,300 x $19)
($122,000/ 6,000 = $20.33) x 2,000
405
Problem 6-8AA (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
406
Problem 6-9AB (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
ALASKA COMPANY
Inventory Shortage
December 31
At Cost
At Retail
Estimated inventory (from part 1) ……………………….
$ 924,182
$ 1,757,000