Concept explainers
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 3PSA
The total cost of goods available for sale is $249300 and the total number of goods available for sale is 680 units
Explanation of Solution
Cost of goods available for sales and the number of goods available for sales:
Date | Particular | Unit | Rate ($) | Total Cost ($) |
1st Jan | Opening inventory | 600 | 45 | 27000 |
10thFeb | Purchases | 400 | 42 | 16800 |
13th March | Purchases | 200 | 27 | 5400 |
21st August | Purchases | 100 | 50 | 5000 |
5th Sept | Purchase | 500 | 46 | 23000 |
Total | 1800 | 77200 |
So, the total cost of goods available for sale is $77200 and the total number of goods available for sale is 1800 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 A.
2.
Answer to Problem 3PSA
The number of units in ending inventory is 400 units.
Explanation of Solution
The number of units in closing inventory is as follows:
The number of units in ending inventory is 400 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 A using FIFO,LIFO and weighted average and specific identification.
3.
Answer to Problem 3PSA
cost assigned to ending inventory using FIFO is $18,400, using LIFO is $18,000, using weighted average method is $ 17156 and using specific identification method is $18,200.
Explanation of Solution
- Cost assigned to ending inventory for the company A using FIFO :
- Calculating the assigned amount of ending inventory according to the LIFO method:
- Calculating the assigned amount of ending inventory according to weighted-average method:
- Cost assigned to total inventory using the specific identification method:
Using FIFO method closing inventory of 400 units will consist:
Particular | Units | Per unit ($) | Amount ($) |
5th September | 400 | 46 | 18,400 |
Total | 18,400 |
Thus, the cost assigned to ending inventory is $18,400 and the cost of goods sold is $58800 using FIFO.
Using the LIFO method closing inventory of 200 units will consist
Particular | Units | Per unit ($) | Amount ($) |
1st Jan | 400 | 45 | 18,000 |
Total | $18,000 |
Thus, the cost of assigned to ending inventory is $18,000 cost of goods sold $58,800 using the LIFO method.
The weighted average cost is calculated as:
The total cost 400 units are:
Thus, cost assigned to ending inventory $ 17156 and cost of goods sold is $60044 using weighted average method.
Using specific identification method closing inventory of 400 units will consist
Particular | Units | Per unit ($) | Amount ($) |
10th Feb | 100 | 42 | 4200 |
21st Aug | 50 | 50 | 2500 |
5th Sept | 250 | 46 | 11500 |
Total | $18200 |
Thus, cost assigned to ending inventory is $18,200 and cost of goods sold is $59,000 using specific identification method.
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 3PSA
Gross using FIFO methods is $46200 , using LIFO method is $45800, using weighted average method is $44956, and specific identification method is $46000.
Explanation of Solution
Total sales
Particular | Units | Per unit cost | Amount |
15th March | 800 | 75 | 60000 |
10th Sept | 600 | 75 | 45000 |
Total | 1400 | 105000 |
Gross profit earn by the company:
Particular | FIFO method | LIFO method | Weighted average method | Specific identification method |
Total Sales | $105000 | $105000 | $105000 | $105000 |
Cost of goods sold | $58800 | $59200 | $60044 | $59,000 |
Total | $46,200 | $45,800 | $44,956 | $46000 |
Thus, gross using FIFO methods is $46200 , using LIFO method is $45800, using weighted average method is $44956, and specific identification method is $46000.
5.
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.
5.
Answer to Problem 3PSA
The manager will prefer a Specific identification method for costing inventory as gross profit is highest in Specific identification method so using this method manager will earn more bonuses.
Explanation of Solution
Specific identification method yield $46,000 gross profit which highest among other methods. So, the manager will prefer a Specific identification method for costing inventory as gross profit is highest in the Specific identification method so using this method manager will earn more bonuses.
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Chapter 5 Solutions
Financial Accounting: Information for Decisions
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