Question

In: Accounting

Required: 1. Determine the dollar amount of cost of goods sold, dollar amount of ending inventory,...

Required:

1. Determine the dollar amount of cost of goods sold, dollar amount of ending inventory, and dollar amount of gross margin using the FIFO, LIFO and specific identification inventory costing methods for the month of October.

2. Complete journal entries for October 3rd and 8th using the specific identification method assuming all purchases and sales were on account.

Beginning Inventory Units 1 – 5 at $24 each

120

October 3 Purchased Units 6 – 15 at $25 each

250

October 8 Sold 8 Units at $40 each

320

October 15 Purchased Units 16 – 25 at $26 each

260

October 20 Sold 9 Units at $40 each

360

October 25 Purchased Units 26 – 35 at $27 each

270

October 31 Sold 12 Units at $42 each

504

For Specific Identification purposes the inventory sold were units 1, 2, 3, 6, 7, 8, 9, 10 on October 8th, units 4, 11, 12, 13, 18, 19, 20, 21, 22 on October 20th and units 14, 23, 26, 27, 28, 29, 30, 31, 32, 33, 34 and 35 on October 31st.

Solutions

Expert Solution

1.

A
FIFO
DATE PARTICULARS UNITS PRICE TOTAL UNITS PRICE TOTAL BALANCE UNITS PRICE BALANCE COST
Opening Inventory 5 24 120 5 24 120
Oct-03 Purchases 10 25 250 5 24 120
10 25 250
Oct-08 Sales 5 24 120 7 25 175
3 25 75
Oct-15 Purchases 10 26 260 7 25 175
10 26 260
Oct-20 Sales 7 25 175 8 26 208
2 26 52
Oct-25 Purchases 10 27 270 8 26 208
10 27 270
Oct-31 Sales 8 26 208 6 27 162
4 27 108
TOTAL 35 900 29 738 6 27 162
Cost of Goods Sold 738 (calculated Above i.e. Total of the sales units at costs at FIFO)
Ending Inventory $ 162 (6 balance units @$27)
Gross Margin (Total Sales Revenue - Cost of Goods Sold)
[(8*40 + 9*40 + 12*42)-738] = 1184-738 = 446 i.e. 37.67%
B
LIFO
DATE PARTICULARS UNITS PRICE TOTAL UNITS PRICE TOTAL BALANCE UNITS PRICE BALANCE COST
Opening Inventory 5 24 120 5 24 120
Oct-03 Purchases 10 25 250 5 24 120
10 25 250
Oct-08 Sales 8 25 200 5 24 120
2 25 50
Oct-15 Purchases 10 26 260 5 24 120
2 25 50
10 26 260
Oct-20 Sales 9 26 234 5 24 120
2 25 50
1 26 26
Oct-25 Purchases 10 27 270 5 24 120
2 25 50
1 26 26
10 27 270
Oct-31 Sales 10 27 270 5 24 120
1 26 26 1 25 25
1 25 25
TOTAL 35 900 29 755 6 145
Cost of Goods Sold 755 (calculated Above i.e. Total of the sales units at costs at LIFO)
Ending Inventory $ 145 (5 balance units @$24+1 balance unit @$25)
Gross Margin (Total Sales Revenue - Cost of Goods Sold)
[(8*40 + 9*40 + 12*42)-755] = 1184-755 = 429 i.e. 36.23%
C
Specific identification
DATE PARTICULARS UNITS PRICE TOTAL UNITS PRICE TOTAL BALANCE UNITS PRICE BALANCE COST
Opening Inventory 1 to 5 24 120 5 (from 1 to 5) 24 120
Oct-03 Purchases 6 to 15 25 250 5 (from 1 to 5) 24 120
10 (from 6 to 15) 25 250
Oct-08 Sales 3 (from 1 to 5) 24 72 2 (from 1 to 5) 24 48
5 (from 6 to 15) 25 125 5 (from 6 to 15) 25 125
Oct-15 Purchases 16 to 25 26 260 2 (from 1 to 5) 24 48
5 (from 6 to 15) 25 125
10 (from 16 to 25) 26 260
Oct-20 Sales 1 (from 1 to 5) 24 24 1 (from 1 to 5) 24 24
3 (from 6 to 15) 25 75 2 (from 6 to 15) 25 50
5 (from 16 to 25) 26 130 5 (from 16 to 25) 26 130
Oct-25 Purchases 26 to 35 27 270 1 (from 1 to 5) 24 24
2 (from 6 to 15) 25 50
5 (from 16 to 25) 26 130
10 (from 26 to 35) 27 270
Oct-31 Sales 1 (from 6 to 15) 25 25 1 (from 1 to 5) 24 24
1 (from 16 to 25) 26 26 1 (from 6 to 15) 25 25
10 (from 26 to 35) 27 270 4 (from 16 to 25) 26 104
TOTAL 35 900 29 747 6 153
Cost of Goods Sold 747 (calculated Above i.e. Total of the sales units at costs at Specific Identification)
Ending Inventory $ 153 (1 balance units @$24+ 1@$25 + 4@26)
Gross Margin (Total Sales Revenue - Cost of Goods Sold)
[(8*40 + 9*40 + 12*42)-747] = 1184-747 = 437 i.e. 36.91%

2. Journal Entries

DATE PARTICULARS DEBIT CREDIT
Oct-03 Purchases 250
To Accounts Payable 250
Oct-08 Accounts Receivable 320
To Sales (3*24 + 5*25) 197
To Profit on sale (320-197) 123

ekkarill92 answered 1 year ago
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