Financial Accounting Fundamentals
Financial Accounting Fundamentals
6th Edition
ISBN: 9781259726910
Author: John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
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Chapter 5, Problem 4AP

1.

To determine

Compute cost of goods available for sale and the number of units available for sale.

1.

Expert Solution
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Explanation of Solution

Calculate cost of goods available for sale and the number of units available for sale.

Cost of Goods Available For Sale
DateParticularsUnits (A)Per Unit (B)Amount (A× B)
Jan 1Beginning Inventory600$45$27,000
Feb 1Purchase400$42$16,800
Mar 13Purchase200$27$5,400
Aug 21Purchase100$50$5,000
Sep 5Purchase500$46$23,000
Total       1,800$77,200

Table (1)

Therefore, total cost of goods available for sale amount is $77,200, and the number of units available for sale is 1,800 units.

2.

To determine

Compute the number of units in ending inventory.

2.

Expert Solution
Check Mark

Explanation of Solution

Calculate number of units in ending inventory as follows:

Ending inventory (units)= Cost of Goods available for sale Cost of goods sold=1,800units1,400units=400units

Working note:

Calculate cost of goods sold.

Cost of goods sold = 15th March sale + 10th September sale= 800units + 600units= 1,400units (1)

3.

To determine

Compute the cost assigned to ending inventory using the following methods:

  1. (a) FIFO
  2. (b) LIFO
  3. (c) Weighted average, and
  4. (d) Specific identification.

3.

Expert Solution
Check Mark

Explanation of Solution

(a)

Compute the cost assigned to ending inventory using FIFO method as follows:

DateParticularsUnits (A)Per Unit (B)Amount (A× B)
Sept 5Ending Inventory400$46$18,400
Total Ending inventory400$18,400

Table (2)

(b)

Compute the cost assigned to ending inventory using LIFO method as follows:

DateParticularsUnits (A)Per Unit (B)Amount (A× B)
Jan 1Ending Inventory400$45$18,000
Total Ending inventory400$18,000

Table (3)

(c)

Compute the cost assigned to ending inventory using weighted average method as follows:

Ending inventory cost=Ending inventory units ×Weighted averageper unit=400units ×$42.89per unit= $17,156

Working note:

Calculate weighted average per unit.

Weighted average per unit = Total cost of goods available for salein amountTotal cost of goods avail for salein units=$77,2001,800units=$42.89per unit (2)

(d)

Compute the cost assigned to ending inventory using specific identification method as follows:

DateParticularsUnits (A)Per Unit (B)Amount (A× B)
Feb 10Ending Inventory100$42$4,200
Aug 21Ending Inventory50$50$2,500
Sep 5Ending Inventory250$46$11,500
Total Ending inventory400$18,200

Table (4)

4.

To determine

Compute gross profit earned by the company for each of the four costing methods in part 3.

4.

Expert Solution
Check Mark

Explanation of Solution

Calculate gross profit earned by the company for each of the four costing methods as follows:

ParticularsFIFOLIFOWeighted AverageSpecific Identification
Sales$150,000$150,000$150,000$150,000
Less: Cost of goods sold$58,800$59,200$59,000$60,044
Gross profit$46,200$45,800$46,000$44,956

Table (5)

Working notes:

Calculate sales amount.

Salesamount =(800units ×$75)+(600units×$75)=$60,000+$45,000=$105,000 (3)

Calculate cost of goods sold.

ParticularsFIFOLIFOWeighted AverageSpecific Identification
Cost of goods available for sale$77,200$77,200$77,200$77,200
Less: Ending Inventory$18,400$18,000$17,156$18,200
Cost of goods sold$58,800$59,900$60,044$59,000

Table (6)

5.

To determine

Identify the method of inventory costing which the manager will prefer, if he earns a bonus based on a percentage of gross profit.

5.

Expert Solution
Check Mark

Explanation of Solution

The Manger would prefer a FIFO method, because comparing to all four methods FIFO method only giving more income.  If he prefers, FIFO method means, he will get a bonus based on a percentage of gross profit.

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Chapter 5 Solutions

Financial Accounting Fundamentals

Ch. 5 - Prob. 5DQCh. 5 - Prob. 6DQCh. 5 - Prob. 7DQCh. 5 - Prob. 8DQCh. 5 - Prob. 9DQCh. 5 - Prob. 10DQCh. 5 - Prob. 11DQCh. 5 - Prob. 12DQCh. 5 - 13. B When preparing interim financial statements,...Ch. 5 - Prob. 14DQCh. 5 - Prob. 15DQCh. 5 - Prob. 16DQCh. 5 - Prob. 17DQCh. 5 - Prob. 1QSCh. 5 - Prob. 2QSCh. 5 - Prob. 3QSCh. 5 - Prob. 4QSCh. 5 - Prob. 5QSCh. 5 - Prob. 6QSCh. 5 - Prob. 7QSCh. 5 - Prob. 8QSCh. 5 - Prob. 9QSCh. 5 - Prob. 10QSCh. 5 - Prob. 11QSCh. 5 - Prob. 12QSCh. 5 - Prob. 13QSCh. 5 - Prob. 14QSCh. 5 - Prob. 15QSCh. 5 - Prob. 16QSCh. 5 - Prob. 17QSCh. 5 - Prob. 18QSCh. 5 - Prob. 19QSCh. 5 - Prob. 20QSCh. 5 - Prob. 21QSCh. 5 - Prob. 22QSCh. 5 - Prob. 23QSCh. 5 - Prob. 1ECh. 5 - Prob. 2ECh. 5 - Prob. 3ECh. 5 - Prob. 4ECh. 5 - Prob. 5ECh. 5 - Prob. 6ECh. 5 - Prob. 7ECh. 5 - Prob. 8ECh. 5 - Prob. 9ECh. 5 - Exercise 5-10 Lower of cost or market Martinez...Ch. 5 - Prob. 11ECh. 5 - Prob. 12ECh. 5 - Prob. 13ECh. 5 - Prob. 14ECh. 5 - Prob. 15ECh. 5 - Prob. 16ECh. 5 - Prob. 17ECh. 5 - Prob. 18ECh. 5 - Prob. 1APCh. 5 - Problem 5-1A Perpetual: Alternative cost...Ch. 5 - Prob. 3APCh. 5 - Prob. 4APCh. 5 - Prob. 5APCh. 5 - Prob. 6APCh. 5 - Prob. 7APCh. 5 - Prob. 8APCh. 5 - Prob. 9APCh. 5 - Prob. 10APCh. 5 - Prob. 1BPCh. 5 - Prob. 2BPCh. 5 - Prob. 3BPCh. 5 - Prob. 4BPCh. 5 - Prob. 5BPCh. 5 - Prob. 6BPCh. 5 - Prob. 7BPCh. 5 - Prob. 8BPCh. 5 - Prob. 9BPCh. 5 - Prob. 10BPCh. 5 - Prob. 5SPCh. 5 - Prob. 1BTNCh. 5 - Prob. 2BTNCh. 5 - Prob. 3BTNCh. 5 - Prob. 4BTNCh. 5 - Prob. 5BTNCh. 5 - ENTERPRENEURIAL DECISION BTN 5-7 Review the...Ch. 5 - Prob. 9BTN
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