Concept explainers
1. (a)
Compute the cost of goods available for sale.
1. (a)
Answer to Problem 7.2P
Determine cost of goods available for sale.
Date | Particulars | Units ($) | Unit cost ($) | Total cost ($) |
(a) | (b) | (c = a × b) | ||
January 1 | Beginning inventory | 400 | 3 | 1,200 |
January 30 | Purchased | 300 | 3.4 | 1,020 |
May 1 | Purchased | 460 | 4 | 1,840 |
Total | 1,160 | $4,060 | ||
Less: Goods sold | 860 | |||
Ending inventory | 300 |
Table (1)
Explanation of Solution
Cost of goods sold:
Cost of goods sold is the accumulate total of all direct cost incurred in manufacturing the goods or the products which has been sold during a period. Cost of goods sold involves direct material, direct labor, and manufacturing overheads.
Therefore, the cost of goods sold available for sale for 300 units of inventory is $4,060.
1. (b) and (c)
Compute the ending inventory and the cost of goods sold under weighted average-cost method.
1. (b) and (c)
Explanation of Solution
In Average Cost Method the cost of inventory is priced at the average rate of the goods available for sale. Following is the mathematical representation:
Determine cost of ending inventory under average-cost method.
Date | Particulars | Units | Unit cost ($) | Total cost ($) |
(a) | (b) | (c = a × b) | ||
Cost of goods available for sale | 1,160 | 3.5 | 4,060 | |
Less: Ending inventory | 300 | 3.5 | 1,050 | |
Cost of goods sold | 860 | 3.5 | $3,010 |
Table (2)
Working note:
Determine average unit cost.
Hence, the cost of goods sold under average-cost method is $3,010 and the value of ending inventory is $1,050.
2. (a)
Compute the cost of goods available for sale.
2. (a)
Answer to Problem 7.2P
Determine cost of goods available for sale.
Date | Particulars | Units ($) | Unit cost ($) | Total cost ($) |
(a) | (b) | (c = a × b) | ||
January 1 | Beginning inventory | 400 | 3 | 1,200 |
January 30 | Purchased | 300 | 3.4 | 1,020 |
May 1 | Purchased | 460 | 4 | 1,840 |
Total | 1,160 | $4,060 | ||
Less: Goods sold | 860 | |||
Ending inventory | 300 |
Table (3)
Explanation of Solution
Cost of goods sold:
Cost of goods sold is the accumulate total of all direct cost incurred in manufacturing the goods or the products which has been sold during a period. Cost of goods sold involves direct material, direct labor, and manufacturing overheads.
Therefore, the cost of goods sold available for sale for 300 units of inventory is $4,060.
2. (b) and (c)
Compute the ending inventory and the cost of goods sold under FIFO.
2. (b) and (c)
Explanation of Solution
In First-in-First-Out method, the cost of initial purchased items is sold first. The value of the ending inventory consist the recent purchased items.
Determine the amount of cost of goods sold.
Date | Particulars | Units | Unit cost ($) | Total cost ($) |
(a) | (b) | (c = a × b) | ||
January 1 | Beginning inventory | 400 | 3 | 1,200 |
January 30 | Purchased | 300 | 3.4 | 1,020 |
May 1 | Purchased | 160 | 4 | 640 |
Cost of goods sold | 3,350 | $2,860 |
Table (4)
Determine ending inventory under FIFO method.
Date | Particulars | Units | Unit cost ($) | Total cost ($) |
(a) | (b) | (c = a × b) | ||
May 1 | Purchased | 300 | 4 | 1,200 |
Ending inventory | 300 | $1,200 |
Table (5)
Hence, the cost of goods sold under FIFO is $2,860 and the value of ending inventory is $1,200.
3. (a)
Compute the cost of goods available for sale.
3. (a)
Answer to Problem 7.2P
Determine cost of goods available for sale.
Date | Particulars | Units ($) | Unit cost ($) | Total cost ($) |
(a) | (b) | (c = a × b) | ||
January 1 | Beginning inventory | 400 | 3 | 1,200 |
January 30 | Purchased | 300 | 3.4 | 1,020 |
May 1 | Purchased | 460 | 4 | 1,840 |
Total | 1,160 | $4,060 | ||
Less: Goods sold | 860 | |||
Ending inventory | 300 |
Table (6)
Explanation of Solution
Cost of goods sold:
Cost of goods sold is the accumulate total of all direct cost incurred in manufacturing the goods or the products which has been sold during a period. Cost of goods sold involves direct material, direct labor, and manufacturing overheads.
Therefore, the cost of goods sold available for sale for 300 units of inventory is $4,060.
3. (b) and (c)
Compute the ending inventory and the cost of goods sold under LIFO.
3. (b) and (c)
Explanation of Solution
In Last-in-First-Out method, the cost of last purchased items is sold first. The value of the closing stock consist the initial purchased items.
Determine the amount of cost of goods sold.
Date | Particulars | Units | Unit cost ($) | Total cost ($) |
(a) | (b) | (c = a × b) | ||
May 1 | Purchased | 460 | 4 | 1,840 |
January 30 | Purchased | 300 | 3.4 | 1,020 |
January 1 | Beginning inventory | 100 | 3 | 300 |
Cost of goods sold | 860 | $3,160 |
Table (7)
Determine ending inventory under LIFO method.
Date | Particulars | Units | Unit cost ($) | Total cost ($) |
(a) | (b) | (c = a × b) | ||
January 1 | Beginning inventory | 300 | 3 | 900 |
Ending inventory | 300 | $900 |
Table (8)
Hence, the cost of goods sold under LIFO is $3,160 and the value of ending inventory is $900.
4. (a)
Compute the cost of goods available for sale.
4. (a)
Answer to Problem 7.2P
Determine cost of goods available for sale.
Date | Particulars | Units ($) | Unit cost ($) | Total cost ($) |
(a) | (b) | (c = a × b) | ||
January 1 | Beginning inventory | 400 | 3 | 1,200 |
January 30 | Purchased | 300 | 3.4 | 1,020 |
May 1 | Purchased | 460 | 4 | 1,840 |
Total | 1,160 | $4,060 | ||
Less: Goods sold | 860 | |||
Ending inventory | 300 |
Table (9)
Explanation of Solution
Cost of goods sold:
Cost of goods sold is the accumulate total of all direct cost incurred in manufacturing the goods or the products which has been sold during a period. Cost of goods sold involves direct material, direct labor, and manufacturing overheads.
Therefore, the cost of goods sold available for sale for 300 units of inventory is $4,060.
4. (b) and (c)
Compute the ending inventory and the cost of goods sold under specific identification method.
4. (b) and (c)
Explanation of Solution
Specific identification method can be said as identifying the items precisely which are being sold and those which are being stored as closing inventory. The companies are required to keep perfect records of the original cost of each and every individual items of the inventory.
Determine the amount of cost of goods sold.
Date | Particulars | Units | Unit cost ($) | Total cost ($) |
(a) | (b) | (c = a × b) | ||
January 1 | Beginning inventory (1) | 64 | 3 | 192 |
January 1 | Beginning inventory (3) | 336 | 3 | 1,008 |
January 30 | Purchased (2) | 96 | 3.4 | 326.4 |
May 1 | Purchased (4) | 364 | 4 | 1,456 |
Cost of goods sold | 3,350 | $2,982.4 |
Table (10)
Determine ending inventory under Specific identification method.
Date | Particulars | Units | Unit cost ($) | Total cost ($) |
(a) | (b) | (c = a × b) | ||
May 1 | Purchased | 96 | 4 | 384 |
January 30 | Purchased | 204 | 3.4 | 693.6 |
Ending inventory | 2,150 | $1,077.6 |
Table (11)
Working note:
Determine the units of sale:
For first Sale:
For second Sale:
Hence, the cost of goods sold under specific identification method is $2,982.4 and the value of ending inventory is $1,077.6.
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Chapter 7 Solutions
FINANCIAL ACCOUNTING + CONNECT PLUS
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