Periodic inventory by three methods The beginning inventory for Midnight Supplies and data on purchases and sales for a three-month period are shown in Problem 6-1A. Instructions 1. Determine the inventory on March 31 and the cost of goods sold for the three-month period, using the first-in, first-out method and the periodic inventory system. 2. Determine the inventory on March 31 and the cost of goods sold for the three-month period, using the last-in, first-out method and the periodic inventory system. 3. Determine the inventory on March 31 and the cost of goods sold for the three-month period, using the weighted average cost method and the periodic inventory system. (Round the weighted average unit cost to the nearest cent.) 4. Compare the gross profit and the March 31 inventories, using the following column headings: FIFO UFO Weighted Average Sales Cost of goods sold Gross profit Inventory, March 31

Q: Expert Answer

(1) To determine Periodic Inventory System: Periodic inventory system is a system, in which the inventory is updated in the accounting records on a periodic basis such as at the end of each month, quarter or year. In other words, it is an accounting method which is used to determine the amount of inventory at the end of each accounting period. 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. 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. 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. To determine: value of inventory and cost of merchandise sold using first in first out method under periodic inventory system. Explanation Working notes: Calculate the units in ending inventory as follows: Units Units in beginning inventory and purchased 136,500 Less: Units sold 125,250 Units in ending inventory 11,250 Table (2) Calculate the merchandise purchases as follows: Purchases... (2) To determine value of inventory and cost of merchandise sold using last in first out method under periodic inventory system. (3) To determine value of inventory and cost of merchandise sold using weighted average method under periodic inventory system. (4) To determine To compare: gross profit and ending inventories of all the three methods.

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Corporate Financial Accounting

14th Edition

Carl Warren + 2 others

Publisher: Cengage Learning

ISBN: 9781305653535

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Answer 2

BuyFind

Corporate Financial Accounting

14th Edition

Carl Warren + 2 others

Publisher: Cengage Learning

ISBN: 9781305653535

Solutions

Chapter

Section

Answer 3

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Chapter

Section

Answer 4

Chapter

Section

Answer 5

(1)

To determine

Periodic Inventory System:

Periodic inventory system is a system, in which the inventory is updated in the accounting records on a periodic basis such as at the end of each month, quarter or year. In other words, it is an accounting method which is used to determine the amount of inventory at the end of each accounting period.

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.

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.

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.

To determine: value of inventory and cost of merchandise sold using first in first out method under periodic inventory system.

Explanation of Solution

Working notes:

Calculate the units in ending inventory as follows:

	Units
Units in beginning inventory and purchased	136,500
Less: Units sold	125,250
Units in ending inventory	11,250

Table (2)

Calculate the merchandise purchases as follows:

Purchases...

Answer 6

(2)

To determine

value of inventory and cost of merchandise sold using last in first out method under periodic inventory system.

Answer 7

(3)

To determine

value of inventory and cost of merchandise sold using weighted average method under periodic inventory system.

Answer 8

(4)

To determine

To compare: gross profit and ending inventories of all the three methods.

Corporate Financial Accounting

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Corporate Financial Accounting

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Additional Business Textbook Solutions

	FIFO	UFO	Weighted Average
Sales
Cost of goods sold
Gross profit
Inventory, March 31