*PROBLEM 6-8A (Continued)
(2)
FIFO
Date
Purchases
Cost of Goods Sold
Balance
January 1
(100 @ $15)
$1,500
January 5
(140 @ $18) $2,520
(100 @ $15)
}
$4,020
(140 @ $18)
January 8
$2,340
January 10
January 15
( 55 @ $20) $1,100
$3,620
( 55 @ $20)
January 16
$3,520
( 50 @ $20)
January 20
}
( 20 @ $22)
(i) Cost of goods sold = $3,120. (ii) Ending inventory = $2,340. (iii) Gross
(3)
Moving-Average Cost
Date
Purchases
Cost of Goods Sold
Balance
January 1
(100 @ $15)
$1,500
January 5
(140 @ $18) $2,520
(240 @ $16.75)a
$4,020
January 8
(110 @ $16.75)
(130 @ $16.75)
January 10
(140 @ $16.75)
January 15
( 55 @ $20) $1,100
January 16
January 20
(90 @ $17.605)
January 25
( 20 @ $22) $ 440
*rounded
a$4,020 ÷ 240 = $16.75 c$3,345 ÷ 190 = $17.61
(i) Cost of goods sold = $3,259. (ii) Ending inventory = $2,201. (iii) Gross
profit = $5,680 – $3,259 = $2,421.
*PROBLEM 6-8A (Continued)
(b)
Gross profit:
LIFO
FIFO
Moving-Average Cost
Sales
$5,680
$5,680
$5,680
Cost of goods sold
3,520
3,120
3,259
Gross profit
$2,160
Ending inventory
$2,201
On the balance sheet, FIFO gives the highest ending inventory (represent–
*PROBLEM 6-9A
(a)
(1)
FIFO
Date
Purchases
Cost of Goods Sold
Balance
July 1
(5 @ $122)
$ 610
(5 @ $122)
$ 610
6
(3 @ $122)
$366
(2 @ $122)
$ 244
11
(7 @ $136)
$ 952
(2 @ $122)
}
$1,196
(7 @ $136)
(2 @ $122)
(3 @ $136)
(4 @ $136)
$ 544
(4 @ $136)
(8 @ $147)
27
}
(2)
MOVING-AVERAGE COST
Date
Purchases
Cost of Goods Sold
Balance
July 1
(5 @ $122)
$ 610
( 5 @ $122)
$ 610
6
(3 @ $122)
$366
( 2 @ $122)
$ 244
11
(7 @ $136)
$ 952
( 9 @ $132.89)*
$1,196
14
(5 @ $132.89)
$664
( 4 @ $132.89)
$ 532
27
(5 @ $142.33)
$712
( 7 @ $142.33)
$ 996
(3)
LIFO
Date
Purchases
Cost of Goods Sold
Balance
July 1
(5 @ $122)
$ 610
(5 @ $122)
$ 610
6
(3 @ $122)
$366
(2 @ $122)
$ 244
11
(7 @ $136)
$ 952
(2 @ $122)
}
$1,196
(7 @ $136)
(2 @ $122)
(2 @ $136)
(2 @ $122)
(2 @ $136)
(8 @ $147)
(2 @ $122)
(2 @ $136)
(b) The highest ending inventory is $1,029 under the FIFO method.
*PROBLEM 6-10A
(a)
November
Net sales …………………………………….. $600,000
Cost of goods sold
Beginning inventory ……………… $ 32,000
Purchases…………………………….. $389,000
Less: Purchase returns and
allowances …………………. $13,300
(b) Net sales ……………………………………….. $700,000
Less: Estimated gross profit
(38% X $700,000) ………………….. 266,000
Estimated cost of goods sold ………….. $434,000
*PROBLEM 6-11A
(a)
Hardcovers
Paperbacks
Cost
Retail
Cost
Retail
Beginning inventory
$ 420,000
$ 640,000
$ 280,000
$ 360,000
Purchases
2,135,000
3,200,000
1,155,000
1,540,000
Purchase discounts
Goods available for sale
1,900,000
$ 740,000
$ 330,000
Cost-to-retail ratio:
Hardcovers—$2,535,000 ÷ $3,840,000 = 66%.
Paperbacks—$1,425,000 ÷ $1,900,000 = 75%.
COMPREHENSIVE PROBLEM SOLUTION
(a)
Dec. 3
Inventory (4,000 X $0.74) ………………………
Accounts Payable ………………………….
2,960
2,960
5
Accounts Receivable (4,400 X $0.90) ……..
Sales Revenue ………………………………
3,960
3,960
Inventory ……………………………………………..
Cost of Goods Sold ……………………….
120
120
17
Inventory (2,200 X $0.80) ………………………
Cash …………………………………………….
1,760
1,760
Cost of Goods Sold (2,100 X $0.74) ……….
1,554
COMPREHENSIVE PROBLEM SOLUTION (Continued)
(b) General Ledger
Cash
Bal. 4,800
1,760
Bal. 3,040
Bal. 9,675
Bal. 21,000
1,760
Bal. 2,250
Accounts Payable
Bal. 3,000
2,960
Bal. 5,960
Bal. 400
200
Bal. 1,700
Bal. 27,000
Sales Revenue
3,960
1,995
Bal. 5,955
Cost of Goods Sold
120
Bal. 4,270
Bal. 200
180
Bal. 180
Accounts Receivable
Bal. 3,900
3,960
180
Accumulated
Depreciation—Equipment
Bal. 1,500
Salaries and Wages Expense
400
Bal. 400
Sales Returns & Allowances
COMPREHENSIVE PROBLEM SOLUTION (Continued)
(c) ANNALISE COMPANY
Adjusted Trial Balance
December 31, 2017
DR.
CR.
Cash ……………………………………………………..
Accounts Receivable ……………………………..
Inventory ……………………………………………….
Accumulated Depreciation—Equipment ….
$ 1,700
Accounts Payable ………………………………….
5,960
Salaries and Wages Payable …………………..
400
Owner’s Capital ……………………………………..
27,000
Sales Revenue ……………………………………….
5,955
Sales Returns & Allowances …………………..
Cost of Goods Sold ………………………………..
Salaries and Wages Expense ………………….
Depreciation Expense …………………………….
(d) ANNALISE COMPANY
Income Statement
For the Month Ending December 31, 2017
Sales revenue ………………………………………
$5,955
Less: Sales returns and allowances ……..
180
Net sales ……………………………………………..
5,775
Cost of goods sold …………………………..…..
Gross profit …………………………………………
Operating expenses
Salaries and wages expense ………….
Depreciation expense …………………….
600
Net income…………………………………………..
COMPREHENSIVE PROBLEM SOLUTION (Continued)
ANNALISE COMPANY
Balance Sheet
December 31, 2017
Assets
Current assets
Cash ……………………………………………….
$ 3,040
Accounts receivable …………………………
Inventory …………………………………………
2,250
Total current assets …………………….
Property, plant, and equipment
Equipment ……………………………………….
21,000
1,700
Total assets …………………………..……………….
Less: Accumulated depreciation—
Liabilities and Owner’s Equity
Current liabilities
Accounts payable …………………………….
$5,960
Salaries and wages payable ……………..
400
Total current liabilities …………………
$ 6,360
COMPREHENSIVE PROBLEM SOLUTION (Continued)
(e) FIFO Method
Units
Unit Cost
Cost of Goods
Available for Sales
Beg. Inventory
3,000
$0.60
$1,800
4,000
2,200
9,200
Ending Inventory
Cost of Goods Sold
Dec. 17
2,200 X $0.80 = $1,760
Cost of goods available for sale
$6,520
Dec. 3
(f) LIFO Method
Ending Inventory
Cost of Goods Sold
Dec. 1
2,900 X $0.60 = $1,740
Cost of goods available for sale
$6,520
Cost of goods sold
$4,780
BYP 6-1 FINANCIAL REPORTING PROBLEM
(a)
September 28, 2013
September 29, 2012
Inventories
$1,764 million
$791 million
(b) Dollar change in inventories between 2012 and 2013:
2013 inventory as a percent of current assets:
(c) Inventories are valued at lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method.
(d)
Apple (in millions)
2013
2012
2011
Cost of Goods Sold
$106,606
$87,846
$64,431