FINANCIAL ACCT.F/UNDERGRADS-W/ACCESS
FINANCIAL ACCT.F/UNDERGRADS-W/ACCESS
1st Edition
ISBN: 9781618531612
Author: Wallace, Nelson, Christensen, Ferris
Publisher: Cambridge
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Chapter 6, Problem 16AE
To determine

Ascertain the cost of goods sold and the ending inventory cost under (a) first-in first-out, (b) last-in first-out, and (c) weighted average cost method.

Expert Solution & Answer
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Explanation of Solution

Perpetual inventory system: The method or system of maintaining, recording, and adjusting the inventory perpetually throughout the year, is referred to as perpetual inventory system.

First-in-First-Out (FIFO): In this method, items purchased initially are sold first. So, the value of the ending inventory consist the recent cost for the remaining unsold items.

Last-in-First-Out (LIFO): In this method, items purchased recently are sold first. So, the value of the ending inventory consist the initial cost for the remaining unsold items.

Weighted-average Cost Method: In this method, the inventories are priced at the average rate of goods available for sales.

Ascertain the cost of goods sold and the ending inventory cost under (a) first-in first-out, (b) last-in first-out, and (c) weighted average cost method as follows:

(a) first-in first-out method:

Perpetual Inventory Costing Method (FIFO)
DatePurchasesCost of Goods SoldInventory on Hand

Quantity

(Units)

Unit Cost ($)

Total Cost

($)

Quantity

(Units)

Unit Cost ($)

Total Cost

($)

Quantity

(Units)

Unit Cost ($)

Total Cost

($)

January 1      200102,000
 
February 11500147,000   200102,000
       500147,000
  9,000
 
March 1   200102,000300144,200
    200142,800  4,200
May 18400166,400   300144,200
     400166,400
  10,600
July 1   300144,200320165,120
    80161,280   
  5,120
October 23100181,800   320165,120
       100181,800
Total1,00015,20078010,280420 6,920

Table (1)

Therefore, the cost of ending merchandised inventory and cost of goods sold under FIFO are $6,920 and $10,280 respectively.

(b) Last-in first-out method:

Perpetual Inventory Costing Method (LIFO)
DatePurchasesCost of Goods SoldInventory on Hand

Quantity

(Units)

Unit Cost ($)

Total Cost

($)

Quantity

(Units)

Unit Cost ($)

Total Cost

($)

Quantity

(Units)

Unit Cost ($)

Total Cost

($)

January 1      200102,000
 
February 11500147,000   200102,000
       500147,000
  9,000
 
March 1   400145,600200102,000
       100141,400
         3,400
May 18400166,400   200102,000
       100141,400
     400166,400
  9,800
July 1   380166,400200102,000
       100141,400
       2016320
  3,620
October 23100181,800   200102,000
       100141,400
       2016320
       100 181,800
Total1,00015,20080012,000420 5,520

Table (2)

Therefore, the cost of ending merchandised inventory and cost of goods sold under LIFO are $5,520 and $12,000 respectively.

(c) Weighted average cost method:

Perpetual Inventory Costing Method (Weighted-average)
DatePurchasesCost of Goods SoldInventory on Hand

Quantity

(Units)

Unit Cost ($)

Total Cost

($)

Quantity

(Units)

Unit Cost ($)

Total Cost

($)

Quantity

(Units)

Unit Cost ($)

Total Cost

($)

January 1      200102,000
 
February 11500147,000   700

12.86

(1)

9,000
 
March 1   40012.865,144300

12.86

3,856
May 18400166,400  700

14.65

(2)

10,256
July 1  38014.655,56732014.654,688
 
October 23100181,800   420

15.35

(3)

6,447
Total1,000 15,40080010,7114206,447

Table (3)

Therefore, the cost of ending merchandised inventory and cost of goods sold under weighted average method are $6,447 and $10,711 respectively.

Working note:

Calculate the average cost of inventory balance after the purchase on May 18.

Here,

DetailsUnitsCost ($)
Beginning Inventory2002,000
Purchase on February 115007,000
Goods Available for Sale on February 117009,000

Table (4)

Weighted-average Cost}=Total Cost of Goods Available For SaleTotal number of units Available for Sale=$9,000700 Units=$12.86 (1)

Calculate the average cost of inventory balance after the purchase on February 11.

Here,

DetailsUnitsCost ($)
Inventory after the Sale on March 13003,856
Purchase on May 184006,400
Goods Available for Sale on February 1170010,256

Table (5)

Weighted-average Cost}=Total Cost of Goods Available For SaleTotal number of units Available for Sale=$10,256700 Units=$16.65 (2)

Calculate the average cost of inventory balance after the purchase on October 23.

Here,

DetailsUnitsCost ($)
Inventory after the Sale on July 13805,567
Purchase on October 231001,800
Goods Available for Sale on February 114807,367

Table (5)

Weighted-average Cost}=Total Cost of Goods Available For SaleTotal number of units Available for Sale=$7,367480 Units=$15.35 (3)

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Chapter 6 Solutions

FINANCIAL ACCT.F/UNDERGRADS-W/ACCESS

Ch. 6 - Prob. 11SSQCh. 6 - Prob. 12SSQCh. 6 - Prob. 13SSQCh. 6 - Prob. 1QCh. 6 - Prob. 2QCh. 6 - Prob. 3QCh. 6 - Prob. 4QCh. 6 - Prob. 5QCh. 6 - Prob. 6QCh. 6 - Prob. 7QCh. 6 - Prob. 8QCh. 6 - Prob. 9QCh. 6 - Prob. 10QCh. 6 - Prob. 11QCh. 6 - Prob. 12QCh. 6 - Prob. 13QCh. 6 - Prob. 14QCh. 6 - Prob. 15QCh. 6 - Prob. 16QCh. 6 - Prob. 17QCh. 6 - Prob. 18QCh. 6 - Prob. 19QCh. 6 - Prob. 20QCh. 6 - Prob. 1SECh. 6 - Prob. 2SECh. 6 - Prob. 3SECh. 6 - Prob. 4SECh. 6 - Prob. 5SECh. 6 - Prob. 6SECh. 6 - Prob. 7SECh. 6 - Prob. 8SECh. 6 - Prob. 9SECh. 6 - Prob. 10SECh. 6 - Prob. 11SECh. 6 - Prob. 12SECh. 6 - Prob. 13SECh. 6 - Prob. 14SECh. 6 - Prob. 1AECh. 6 - Prob. 2AECh. 6 - Prob. 3AECh. 6 - Prob. 4AECh. 6 - Prob. 5AECh. 6 - Prob. 6AECh. 6 - Prob. 7AECh. 6 - Prob. 8AECh. 6 - Prob. 9AECh. 6 - Prob. 10AECh. 6 - Prob. 11AECh. 6 - Prob. 12AECh. 6 - Prob. 13AECh. 6 - Prob. 14AECh. 6 - Prob. 15AECh. 6 - Prob. 16AECh. 6 - Prob. 1BECh. 6 - Prob. 2BECh. 6 - Prob. 3BECh. 6 - Prob. 4BECh. 6 - Prob. 5BECh. 6 - Prob. 6BECh. 6 - Prob. 7BECh. 6 - Prob. 8BECh. 6 - Prob. 9BECh. 6 - Prob. 10BECh. 6 - Prob. 11BECh. 6 - Prob. 12BECh. 6 - Prob. 13BECh. 6 - Prob. 14BECh. 6 - Prob. 15BECh. 6 - Prob. 16BECh. 6 - Prob. 2APCh. 6 - Prob. 3APCh. 6 - Prob. 4APCh. 6 - Prob. 5APCh. 6 - Prob. 6APCh. 6 - Prob. 7APCh. 6 - Prob. 8APCh. 6 - Prob. 9APCh. 6 - Prob. 10APCh. 6 - Prob. 11APCh. 6 - Prob. 12APCh. 6 - Prob. 13APCh. 6 - Prob. 2BPCh. 6 - Prob. 3BPCh. 6 - Prob. 4BPCh. 6 - Prob. 5BPCh. 6 - Prob. 6BPCh. 6 - Prob. 7BPCh. 6 - Prob. 8BPCh. 6 - Prob. 9BPCh. 6 - Prob. 10BPCh. 6 - Prob. 11BPCh. 6 - Prob. 12BPCh. 6 - Prob. 13BPCh. 6 - Prob. 6SPCh. 6 - Prob. 1EYKCh. 6 - Prob. 2EYKCh. 6 - Prob. 3EYKCh. 6 - Prob. 4EYKCh. 6 - Prob. 5EYKCh. 6 - Prob. 7EYKCh. 6 - Prob. 9EYKCh. 6 - Prob. 10EYKCh. 6 - Prob. 11EYK
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