Question

Warnerwoods Company uses a perpetual inventory system. It entered into the following purchases and sales transactions for March.

Date

Activities

Units Acquired at Cost

Units Sold at Retail

Mar.

1

Beginning inventory

140

units

@ $51.80 per unit

Mar.

5

Purchase

245

units

@ $56.80 per unit

Mar.

9

Sales

300

units

@ $86.80 per unit

Mar.

18

Purchase

105

units

@ $61.80 per unit

Mar.

25

Purchase

190

units

@ $63.80 per unit

Mar.

29

Sales

170

units

@ $96.80 per unit

Totals

680

units

470

units

Required:
1. Compute cost of goods available for sale and the number of units available for sale.

Beginning inventory

Purchases:

March 5

March 18

March 25

Total-

Compute the number of units in ending inventory.
Ending Inventory _____ units

Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification. For specific identification, the March 9 sale consisted of 85 units from beginning inventory and 215 units from the March 5 purchase; the March 29 sale consisted of 65 units from the March 18 purchase and 105 units from the March 25 purchase.

4. Compute gross profit earned by the company for each of the four costing methods. For specific identification, the March 9 sale consisted of 85 units from beginning inventory and 215 units from the March 5 purchase; the March 29 sale consisted of 65 units from the March 18 purchase and 105 units from the March 25 purchase. (Round weighted average cost per unit to two decimals and final answers to nearest whole dollar.)

FIFO LIFO Avg Cost Spec ID

Sales

Less: Costs of goods sold

Gross Profit

Answer 1

Warnerwoods Company

Sales value = (300 units × $ 86.80)+(170 units × $ 96.80)

= $ 42,496

Cost of goods available for sale = Opening inventory + Purchases

= (140 units × $ 51.80)+(245 units × $ 56.80)+(105 units × $ 61.80)+(190 units × $ 63.80)

= $ 39,779

Units available for sale = Opening units + Purchase units

= 140 + (245+105+190) = 680 units

Ending inventory = Available units for sale - sales units

= 680 units - 470 units = 210 units

		FIFO	LIFO	Average cost	Specific identification
a	Ending inventory	(190units×$63.80)+(20units×$61.80) = $ 13,358	(85units×$51.80)+(105units×$61.80)+(20units×$63.80) = $ 12,168	210units×$61.27 = $ 12,867	(55units×$51.8)+(30units×$56.8)+(40units×$61.8)+(85units×$63.8) = $ 12,448
b	Cost of goods sold	(140units×$51.8)+(245units×$56.8)+(85units×$61.8) = $ 26.421	(245units×$56.8)+(55units×$51.8)+(170units×$63.8) = $ 27,611	(300units×$53.98)+(170units×$61.27) = $ 26,910	(85units×$51.8)+(215units×$56.8)+(65units×$61.8)+(105units×$63.8) = $ 27,331

Gross profit : ($)

		FIFO	LIFO	Average cost	Specific identification
a	Sales	42,496	42,496	42,496	42,496
b	Less: Cost of goods sold	(26,421)	(27,611)	(26,910)	(27,331)
c	Gross profit	16,075	14,885	15,586	15,165