Question

PA7-1 Analyzing the Effects of Four Alternative Inventory Methods in a Periodic Inventory System [LO 7-3] Gladstone Company tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system.

Assume its accounting records provided the following information at the end of the annual accounting period, December 31. Transactions Units Unit Cost Beginning inventory, January 1 1,500 $ 60 Transactions during the year:

a. Purchase, January 30 2,600 72 b. Sale, March 14 ($100 each) (1,150 )

c. Purchase, May 1 1,300 90 d. Sale, August 31 ($100 each) (1,600 )

Assuming that for Specific identification method (item 1d) the March 14 sale was selected two-fifths from the beginning inventory and three-fifths from the purchase of January 30. Assume that the sale of August 31 was selected from the remainder of the beginning inventory, with the balance from the purchase of May 1.

Required: 1. Compute the amount of goods available for sale, ending inventory, and cost of goods sold at December 31 under each of the following inventory costing methods: (Round intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.) 2-a.

Of the four methods, which will result in the highest gross profit? Last-in, first-out Weighted average cost First-in, first-out Specific identification 2-b. Of the four methods, which will result in the lowest income taxes? Last-in, first-out Weighted average cost First-in, first-out Specific identification

I need the specific identification part

Answer 1

STATEMENT SHOWING INVENTORY RECORD UNDER PERIODIC LIFO METHOD
	RECIEPTS			COST OF GOODS SOLD			BALANCE
DATE	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $
1-Jan	1500	60	90000				1500	60	90000
Purchasse
30-Jan	2600	72	187200	1450	72	104400	1150	72	82800
1-May	1300	90	117000	1300	90	117000
TOTAL	5400		394200	2750		221400	2650		172800
STATEMENT SHOWING INVENTORY RECORD UNDER PERIODIC WEIGHTED AVERAGE METHOD
	RECIEPTS			COST OF GOODS SOLD			BALANCE
DATE	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $
1-Jan	1500	60	90000
Purchasse
30-Jan	2600	72	187200
1-May	1300	90	117000
TOTAL	5400	73	394200	2750	73	200750	2650	73	193450
STATEMENT SHOWING INVENTORY RECORD UNDER PERIODIC FIFO METHOD
	RECIEPTS			COST OF GOODS SOLD			BALANCE
DATE	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $
1-Jan	1500	60	90000	1500	60	90000
Purchasse
30-Jan	2600	72	187200	1250	72	90000	1350	72	97200
1-May	1300	90	117000				1300	90	117000
TOTAL	5400		394200	2750		180000	2650		214200
STATEMENT SHOWING INVENTORY RECORD UNDER PERIODIC SPECIFIC IDENTIFICATION METHOD
	RECIEPTS			COST OF GOODS SOLD			BALANCE
DATE	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $
1-Jan	1500	60	90000	1500	60	90000
Purchasse
30-Jan	2600	72	187200	690	72	49680	1910	72	137520
1-May	1300	90	117000	560	90	50400	740	90	66600
TOTAL	5400		394200	2750		190080	2650		204120
			Available cost		ending	COGS
			of goods		inventory
	LIFO		394200		172800	221400
	Average		394200		193450	200750
	FIFO		394200		214200	180000
	Specific Identification		394200		204120	190080
Req 2-a
FIFO
Req 2-b:
LIFO