Financial Accounting
Financial Accounting
5th Edition
ISBN: 9781259914898
Author: SPICELAND
Publisher: MCG
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Chapter 6, Problem 1PB

1.

To determine

Compute the ending inventory and cost of goods sold using the specific identification method.

1.

Expert Solution
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Explanation of Solution

Specific identification method:

Specific identification method is a method in which the company records each item of the inventory at its original cost. Under this method, when the goods are sold, the company can easily identify the original costs at which they were purchased for. This method helps in arriving at the accurate cost of goods sold, and ending inventory.

Calculate the units of ending inventory.

Calculation of Ending Inventory
DetailsNumber of UnitsRate Per Unit ($)Total Cost ($)
Beginning balance16
Less: Sales – June 7(11)
Less: sales– June 15(3)
Less: Sales –June 27(1)
Balance1350350
Purchases:
June 1210
Less: Sales – June 15(9)
Balance1340340
Purchases:
June 2410
Less: October 28(7)
Balance3330990
June 2993202,880
Ending Inventory144,560

Table (1)

Therefore, the cost of Ending Inventory in specific identification method is $4,560.

Calculate the cost of goods sold:

Calculation of Cost of Goods Sold
DetailsNumber of UnitsRate Per Unit ($)Total Cost ($)
June 1: Beginning balance113503,850
June 1: Beginning balance33501,050
June 12: Purchase93403,060
June 1: Beginning balance1350350
June 24: Purchase73302,310
Cost of Goods Sold3110,620

Table (2)

Therefore, the Cost of Goods Sold in specific identification method is $10,620.

2.

To determine

Compute the ending inventory and cost of goods sold using the FIFO method.

2.

Expert Solution
Check Mark

Explanation of Solution

First-in-First-Out:

In First-in-First-Out method, the costs of the initially purchased items are considered as cost of goods sold, for the items which are sold first. The value of the ending inventory consists of the recent purchased items.

Calculate the total Cost and units of Goods Available for Sales.

Calculation of Goods Available for Sales
DetailsNumber of UnitsRate per unit ($)Total Cost ($)
Beginning balance163505,600
Add: Purchases
June 12103403,400
June 24103303,300
June 2993202,880

Total Goods available for Sale

45

15,180

Table (3)

Calculate the units of ending inventory.

Calculation of Ending Inventory (Units)
DetailsNumber of UnitsNumber of Units
Beginning balance16
Add: Purchases
June 1210
June 2410
June 299
Total Goods available for Sale45
Less: Sales
June 711
June 1512
June 278
Total Sales(31)
Ending Inventory14

Table (4)

Calculate the cost of ending inventory.

The ending inventory is 14 units.

Calculation of Cost of Ending Inventory
DetailsNumber of UnitsRate per Unit ($)Total Cost ($)
June 2453301,650
June 2993202,880
Ending Inventory144,530

Table (5)

In FIFO method the ending inventory comprises of the inventory purchased last, because the inventory purchased first were sold first.

Therefore, the cost of Ending Inventory in the FIFO is $4,530.

Cost of Goods Sold.

31 units are sold.

Calculation of Cost of Goods Sold
DetailsNumber of UnitsRate per Unit ($)Total Cost ($)
Beginning Inventory163505,600
June 12103403,400
June 2453301,650
Cost of Goods Sold

31

10,650

Table (6)

As it is FIFO method the earlier purchased items will sell first.

Therefore, the Cost of Goods Sold in the FIFO Method is $10,650.

3.

To determine

Compute the ending inventory and cost of goods sold using the LIFO method.

3.

Expert Solution
Check Mark

Explanation of Solution

Last-in-Last-Out:

In Last-in-First-Out method, the costs of last purchased items are considered as the cost of goods sold, for the items which are sold first. The value of the closing stock consists of the initial purchased items.

Ending Inventory:

Calculate the cost of ending inventory.

Calculation of Cost of Ending Inventory
DetailsNumber of UnitsRate per Unit ($)Total Cost ($)
Beginning Inventory143504,900
Ending Inventory143504,900

Table (7)

  • The ending inventory is 14 units (Refer to Table 4).
  • In LIFO method, the ending inventory comprises of the inventory purchased first, because the inventory purchased last were sold first.
  • Therefore, the ending inventory of 8 units is from the beginning inventory.

Therefore, the cost of Ending Inventory in the LIFO method is $4,900.

Cost of Goods Sold:

DetailsNumber of UnitsRate per unit ($)Total Cost ($)
Beginning Inventory2350700
June 12 Purchase103403,400
June 24 Purchase103303,300
June 29 Purchase93202,880
Cost of Goods Sold

31

10,280

Table (8)

  • 31 units are sold (Refer to Table 4).
  • As it is LIFO method the recent purchased items will sell first.
  • Hence, the cost of goods sold will be the recent purchased items.

Therefore, the Cost of Goods Sold in the LIFO Method is $10,280.

4.

To determine

Compute the ending inventory and cost of goods sold using the Weighted-average method.

4.

Expert Solution
Check Mark

Explanation of Solution

Weighted-average cost method:

Under Weighted average cost method, the company calculates a new average cost after every purchase is made. It is determined by dividing the cost of goods available for sale by the units on hand.

Calculate the Weighted-average cost.

Total cost of goods available for sale = $15,180 (Refer to table - 3)

Total units of goods available for sale = 45 units (Refer to table - 3)

Weighted-averageCost}=Total Cost of Goods Available For SaleTotal number of units Available for Sale=$15,18045 Units=$337.3333 (1)

Calculate the amount of Ending Inventory.

Weighted- average cost per unit = $337.3333 (1)

Number of units in ending inventory = 14 units (Refer to table - 4)

Cost of Ending inventory=((Number of units inEnding inventory) ×Weighted-average cost per unit)=14units × $337.3333=$4,722.6 (2)

Therefore, the cost of Ending Inventory in the Weighted-average-cost Method is $4,722.6.

Calculate the Cost of Goods Sold.

Weighted- average cost per unit= $337.3333 (1)

Units sold = 31 units

Cost of Goods Sold=(Number of units Sold ×Weighted-average cost per unit)=31 units×$337.3333=$10,457.33 (3)

Therefore, the Cost of goods sold in the Weighted-average-cost Method is $10,457.33.

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Chapter 6 Solutions

Financial Accounting

Ch. 6 - 11. Maxwell Corporation has the following...Ch. 6 - Prob. 12SSQCh. 6 - Prob. 13SSQCh. 6 - Prob. 14SSQCh. 6 - Prob. 15SSQCh. 6 - Prob. 1AECh. 6 - Prob. 2AECh. 6 - Prob. 1RQCh. 6 - Prob. 2RQCh. 6 - Prob. 3RQCh. 6 - Prob. 4RQCh. 6 - Prob. 5RQCh. 6 - 6. What is a multiple-step income statement? What...Ch. 6 - Prob. 7RQCh. 6 - Prob. 8RQCh. 6 - Prob. 9RQCh. 6 - Prob. 10RQCh. 6 - Prob. 11RQCh. 6 - 12. Explain how LIFO generally results in lower...Ch. 6 - Prob. 13RQCh. 6 - Prob. 14RQCh. 6 - Prob. 15RQCh. 6 - Prob. 16RQCh. 6 - Prob. 17RQCh. 6 - Prob. 18RQCh. 6 - Prob. 19RQCh. 6 - Prob. 20RQCh. 6 - Prob. 21RQCh. 6 - Prob. 22RQCh. 6 - Prob. 23RQCh. 6 - Prob. 24RQCh. 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 - BE6-17 Refer to the information in BE6-10, but now...Ch. 6 - Prob. 18BECh. 6 - Prob. 19BECh. 6 - BE6–20 Refer to the information in BE6–13, but now...Ch. 6 - Prob. 21BECh. 6 - Prob. 22BECh. 6 - Prob. 1ECh. 6 - Prob. 2ECh. 6 - Prepare a multiple-step income statement and...Ch. 6 - Prob. 4ECh. 6 - Prob. 5ECh. 6 - E6-6 Bingerton Industries began the year with...Ch. 6 - Prob. 7ECh. 6 - Prob. 8ECh. 6 - Prob. 9ECh. 6 - Prob. 10ECh. 6 - Prob. 11ECh. 6 - Prob. 12ECh. 6 - Calculate inventory using lower of cost and net...Ch. 6 - Calculate inventory using lower of cost and net...Ch. 6 - Prob. 15ECh. 6 - Prob. 16ECh. 6 - Prob. 17ECh. 6 - Prob. 18ECh. 6 - Prob. 19ECh. 6 - Prob. 20ECh. 6 - Prob. 21ECh. 6 - Prob. 1PACh. 6 - Prob. 2PACh. 6 - Prob. 3PACh. 6 - Prob. 4PACh. 6 - Prob. 5PACh. 6 - Prob. 6PACh. 6 - Prepare a multiple-step Income statement and...Ch. 6 - P6-8A Wawa Food Markets is a convenience store...Ch. 6 - Prob. 9PACh. 6 - Correct inventory Understatement and calculate...Ch. 6 - Prob. 1PBCh. 6 - Prob. 2PBCh. 6 - Prob. 3PBCh. 6 - Prob. 4PBCh. 6 - Prob. 5PBCh. 6 - Prob. 6PBCh. 6 - Prob. 7PBCh. 6 - Prob. 8PBCh. 6 - Prob. 9PBCh. 6 - Prob. 10PBCh. 6 - Prob. 1APCh. 6 - American Eagle Outfitters, Inc. AP6-2 Financial...Ch. 6 - Prob. 3APCh. 6 - Prob. 4APCh. 6 - Ethics AP6-5 Horizon Corporation manufactures...Ch. 6 - Prob. 6APCh. 6 - Prob. 7APCh. 6 - Prob. 8AP
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