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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

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Corporate Financial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781305653535

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Section
BuyFindarrow_forward

Corporate Financial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781305653535
Chapter 6, Problem 6.4APR
Textbook Problem
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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      

(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...

(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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Chapter 6 Solutions

Corporate Financial Accounting
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Ch. 6 - Cost flow methods The following three identical...Ch. 6 - Perpetual inventory using FIFO Beginning...Ch. 6 - Perpetual inventory using LIFO Beginning...Ch. 6 - Periodic inventory using FIFO, UFO, and weighted...Ch. 6 - Lower-of-cost-or-market method On the basis of the...Ch. 6 - Effect of inventory errors During the taking of...Ch. 6 - Control of inventories Triple Creek Hardware Store...Ch. 6 - Control of inventories Hardcase Luggage Shop is a...Ch. 6 - Perpetual inventory using FIFO Beginning...Ch. 6 - Perpetual inventory using LIFO Assume that the...Ch. 6 - Perpetual inventory using LIFO Beginning...Ch. 6 - Perpetual inventory using FIFO Assume that the...Ch. 6 - FIFO and UFO costs under perpetual inventory...Ch. 6 - Weighted average cost flow method under perpetual...Ch. 6 - Weighted average cost flow method under perpetual...Ch. 6 - Perpetual inventory using FIFO Assume that the...Ch. 6 - Perpetual inventory using LIFO Assume that the...Ch. 6 - Periodic inventory by three methods The units of...Ch. 6 - Periodic inventory by three methods; cost of goods...Ch. 6 - Comparing inventory methods Assume that a firm...Ch. 6 - Lower-of-cost-or-market inventory On the basis of...Ch. 6 - Inventory on the balance sheet Based on the data...Ch. 6 - Effect of errors n physical inventory Madison...Ch. 6 - Effect of errors in physical inventory Fonda...Ch. 6 - Error in inventory During 20Y5, the accountant...Ch. 6 - Retail method A business using the retail method...Ch. 6 - Retail method A business using the retail method...Ch. 6 - Retail method A business using the retail method...Ch. 6 - Retail method On the basis of the following data,...Ch. 6 - Gross profit method The inventory was destroyed by...Ch. 6 - Gross profit method Based on the following data,...Ch. 6 - Gross profit method Based on the following data,...Ch. 6 - FIFO perpetual inventory The beginning inventory...Ch. 6 - LIFO perpetual inventory The beginning inventory...Ch. 6 - Weighted average cost method with perpetual...Ch. 6 - Periodic inventory by three methods The beginning...Ch. 6 - Periodic inventory by three methods Dymac...Ch. 6 - Lower-of-cost-or-market inventory Data on the...Ch. 6 - Retail method; gross profit method Selected data...Ch. 6 - FIFO perpetual inventory The beginning inventory...Ch. 6 - LIFO perpetual inventory The beginning inventory...Ch. 6 - Weighted average cost method with perpetual...Ch. 6 - Periodic inventory by three methods The beginning...Ch. 6 - Periodic inventory by three methods Pappas...Ch. 6 - Lower-of-cost-or-market inventory Data on the...Ch. 6 - Retail method; gross profit method Selected data...Ch. 6 - Continuing Company AnalysisAmazon: Inventory...Ch. 6 - Costco, Walmart, Nordstrom: Inventory turnover and...Ch. 6 - Monster Beverage and Brown-Forman: Inventory...Ch. 6 - Hewlett-Packard and Apple: Inventory turnover and...Ch. 6 - Ethics in Action Sizemo Elektroniks sells...Ch. 6 - Communication Golden Eagle Company began...

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