Question

You are provided with the following information for Pina Colada Inc. for the month ended June 30, 2019. Pina Colada uses the periodic system for inventory. Date Description Quantity Unit Cost or Selling Price June 1 Beginning inventory 40 $40 June 4 Purchase 138 44 June 10 Sale 107 70 June 11 Sale return 13 70 June 18 Purchase 53 46 June 18 Purchase return 10 46 June 25 Sale 63 75 June 28 Purchase 26 50

Calculate weighted-average cost per unit. (Round answer to 2 decimal places, e.g. 5.25.) Weighted-average cost per unit $enter Weighted-average cost per unit in dollars rounded to 2 decimal places

Calculate ending inventory, cost of goods sold, gross profit under each of the following methods. (1) LIFO. (2) FIFO. (3) Average-cost. (Round average-cost method answers to 2 decimal places, e.g. 1,250.25 and other answers to 0 decimal places, e.g. 1,250. Use weighted-average unit cost rounded to 2 decimal places for computations.) LIFO FIFO AVERAGE-COST The ending inventory $enter a dollar amount rounded to 0 decimal places $enter a dollar amount rounded to 0 decimal places $enter a dollar amount rounded to 2 decimal places The cost of goods sold $enter a dollar amount rounded to 0 decimal places $enter a dollar amount rounded to 0 decimal places $enter a dollar amount rounded to 2 decimal places Gross profit $enter a dollar amount rounded to 0 decimal places $enter a dollar amount rounded to 0 decimal places $enter a dollar amount rounded to 2 decimal places

Calculate gross profit rate under each of the following methods. (1) LIFO. (2) FIFO. (3) Average-cost. (Round answers to 1 decimal place, e.g. 51.2%.) LIFO FIFO AVERAGE-COST Gross profit rate enter percentages rounded to 1 decimal place % enter percentages rounded to 1 decimal place % enter percentages rounded to 1 decimal place %

Compare the results for the three cost flow assumptions and answer the following questions. In this period of rising prices, LIFO gives the select an option lowesthighest cost of goods sold and the select an option lowesthighest gross profit. FIFO gives the select an option lowesthighest cost of goods sold and the select an option highestlowest gross profit.

Answer 1

Date	Transaction	Unit	Amount
June 1	Beginning inventory	40	$1,600
June 4	Purchase	138	6,072
June 18	Purchase	53	2,438
June 18	Purchase return	(10)	(460)
June 28	Purchase	26	1,300
Total		247	$10,950

Weighted average cost per unit = Cost of goods available / Number of units

Weighted average cost per unit = $10,950 / 247 = $44.33 per unit

Ending inventory units = 247 - 157 = 90 units

Sales = (107-13)*$70 + 63*$75

Sales = 6,580 + 4,725 = $11,305

2.

	LIFO	FIFO	Average cost
Ending inventory	$3,800 ($1,600+50*$44)	$4,202 ($1,300+43*$46+21*$44)	$3,990 (90*$44.33)
Cost of goods sold	7,150 ($10,950-3,800)	6,748 ($10,950-4,202)	6,960 ($10,950-3,990)
Gross profit	$4,155 ($11,305-7,150)	$4,557 ($11,305-6,748)	4,345 ($11,305-6,960)

	LIFO	FIFO	Average cost
Gross profit rate	36.75%($4,155/11,305*100)	40.31%($4,557/11,305*100)	38.43%($4,345/11,305*100)

In period of rising prices, LIFO gives highest cost of goods sold and lowest gross profit  and FIFO gives lowest cost of goods sold and highest gross profit