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1.
Introduction:
Inventory is a record of finished goods of a company which they can sell to the customer, work in progress which can be transformed into finish goods and raw material which is a means of production. Inventory is also classified as a current asset in the balance sheet and it is valued by FIFO LIFO and weighted average method.
To calculate: The total cost of goods available for sale and the number of units available for sales.
1.
Answer to Problem 2PSB
The total cost of goods available for sale is 235,500 and the total number of goods available for sale is 65 units
Explanation of Solution
Cost of goods available for sales and the number of goods available for sales:
| Date | Particular | Unit | Rate ($) | Total Cost ($) |
| 1st April | Opening inventory | 20 | 3000 | 60000 |
| 6th April | Purchases | 30 | 3500 | 105,000 |
| 17th April | Purchases | 5 | 4500 | 22,500 |
| 25st April | Purchases | 10 | 4800 | 48,000 |
| Total | 65 | 235,500 | ||
So, the total cost of goods available for sale is $23,500 and the total number of goods available for sale is 65 units
2.
Introduction:
Inventory is a record of finished goods of a company which they can sell to the customer, work in progress which can be transformed into finish goods and raw material which is a means of production. Inventory is also classified as a current asset in the balance sheet and it is valued by FIFO LIFO and weighted average method.
To compute: The number of unit in ending inventory for the company M.
2.
Answer to Problem 2PSB
The number of units in ending inventory is 5 units.
Explanation of Solution
The number of units in closing inventory is as follows:
The number of units in ending inventory is 5 units
3.
Introduction:
Inventory is a record of finished goods of a company which they can sell to the customer, work in progress which can be transformed into finish goods and raw material which is a means of production. Inventory is also classified as a current asset in the balance sheet and it is valued by FIFO LIFO and weighted average method.
To compute: The cost assigned to ending inventory for the company M using FIFO, LIFO and weighted average and specific identification.
3.
Answer to Problem 2PSB
Cost assigned to ending inventory using FIFO is $24,000, using LIFO is $15,000, using weighted average is $ 20000 and specific Identification is $22,500.
Explanation of Solution
- Cost assigned to ending inventory for the company A using FIFO :
- Calculating the assigned amount of ending inventory according to LIFO method:
Using FIFO method closing inventory of 5 units will consist:
Thus, cost assigned to ending inventory using FIFO is $24,000.
Using the LIFO method closing inventory of 5 units will consist
Thus, the cost of assigned to ending inventory using LIFO is $15,000
Calculating the assigned amount of ending inventory according to the weighted-average method:
The weighted average cost is calculated as:
| Date | Particular | No of unit | Price | Total | Balance inventory | ||
| No of units | Price | Total | |||||
| 1st April | Opening inventory | 20 | 3,000 | 60,000 | 20 | 3,000 | 60,000 |
| 6th April | Purchase | 30 | 3,500 | 105,000 | 50 | 3,300 | 165,000 |
| 9th April | Sales | (35) | 3,300 | (115,500) | 15 | 3,300 | 49,500 |
| 17th April | Purchase | 5 | 4,500 | 22,500 | 20 | 3,600 | 72,000 |
| 25th April | Purchase | 10 | 4,800 | 48,000 | 30 | 4,000 | 120,000 |
| 30th April | Sales | (25) | 4,000 | (100,000) | 5 | 4,000 | 20,000 |
Thus, cost assigned to ending inventory of $ 20,000
Cost assigned to total inventory using the specific identification method:
Using specific identification method closing inventory of 5 units will consist
Thus, the cost assigned to ending inventory is $22,500.
4.
Introduction:
Inventory is a record of finished goods of a company which they can sell to the customer, work in progress which can be transformed into finish goods and raw material which is a means of production. Inventory is also classified as a current asset in the balance sheet and it is valued by FIFO LIFO and weighted average method.
To compute: The gross profit earn by the company is cost assigned to ending inventory for the company A using FIFO,LIFO and weighted average and specific identification.
4.
Answer to Problem 2PSB
Gross using FIFO methods is $558,500, using LIFO method is $549,500, using weighted average method is $55,4500, and specific identification method is $557,000.
Explanation of Solution
| Particular | FIFO | LIFO | weighted average | Specific identification |
| Cost of goods available for sale | 235500 | 235500 | 235500 | 235500 |
| Less: closing stock 5 units | 24000 | 15000 | 200,000 | 22500 |
| Cost of goods sold | 211,500 | 220,500 | 215,500 | 213,000 |
Gross profit earned by the company:
| Particular | FIFO method | LIFO method | Weighted average method | Specific identification method |
| Total Sales | $770,000 | $770,000 | $770,000 | $770,000 |
| Less: Cost of goods sold | 211,500 | 220,500 | 215,500 | 213,000 |
| Total | $558,500 | $549,500 | $554,500 | 557,000 |
Thus, gross using FIFO methods is $558,500, using the LIFO method is $549,500, using the weighted average method is $554500, and the specific identification method is $557,000.
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Chapter 5 Solutions
Financial Accounting: Information for Decisions
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