Question

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			3,400		$	50
Transactions during the year:
a.	Purchase, January 30		4,700			65
b.	Sale, March 14 ($100 each)		(3,050	)
c.	Purchase, May 1		3,400			80
d.	Sale, August 31 ($100 each)		(3,500	)

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.) 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 3,400 $ 50   Transactions during the year:   a. Purchase, January 30 4,700 65   b. Sale, March 14 ($100 each) (3,050 )   c. Purchase, May 1 3,400 80   d. Sale, August 31 ($100 each) (3,500 ) 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.) a. last in, first out b. weighted average cost c. first in, first out d. specific identification Amount of Goods available for sale, ending inventory, cost of goods sold for each

         

Answer 1

Solution a:

Computation of COGS and ending inventory - Periodic LIFO
Particulars	Cost of goods available for sale			Cost of goods sold			Ending Inventory
	Nos of units	Unit Cost	Cost of goods available for sale	Nos of units sold	Unit Cost	Cost of goods sold	Nos of units in ending inventory	Unit Cost	Ending inventory
Beginning inventory	3400	$50.00	$170,000	0	$50.00	$0.00	3400	$50.00	$170,000.00
Purchases:
30-Jan	4700	$65.00	$305,500	3150	$65.00	$204,750.00	1550	$65.00	$100,750.00
1-May	3400	$80.00	$272,000	3400	$80.00	$272,000.00	0	$80.00	$0.00
Total	11500		$747,500	6550		$476,750.00	4950		$270,750.00

Solution b:

Computation of COGS and ending inventory - Periodic Weighted Average cost method
Particulars	Cost of goods available for sale			Cost of goods sold - Average cost			Ending Inventory - Average cost
	Nos of units	Unit Cost	Cost of goods available for sale	Nos of units sold	Unit Cost	Cost of goods sold	Nos of units in ending inventory	Unit Cost	Ending inventory
Beginning inventory	3400	$50.00	$170,000
Purchases:
30-Jan	4700	$65.00	$305,500
1-May	3400	$80.00	$272,000
Total	11500	$65.00	$747,500	6550	$65.00	$425,750	4950	$65.00	$321,750

Solution c:

Computation of COGS and ending inventory - Periodic FIFO
Particulars	Cost of goods available for sale			Cost of goods sold			Ending Inventory
	Nos of units	Unit Cost	Cost of goods available for sale	Nos of units sold	Unit Cost	Cost of goods sold	Nos of units in ending inventory	Unit Cost	Ending inventory
Beginning inventory	3400	$50.00	$170,000	3400	$50.00	$170,000.00	0	$50.00	$0.00
Purchases:
30-Jan	4700	$65.00	$305,500	3150	$65.00	$204,750.00	1550	$65.00	$100,750.00
1-May	3400	$80.00	$272,000	0	$80.00	$0.00	3400	$80.00	$272,000.00
Total	11500		$747,500	6550		$374,750.00	4950		$372,750.00

Solution d:

Computation of COGS and ending inventory - Specific identification
Particulars	Cost of goods available for sale			Cost of goods sold			Ending Inventory
	Nos of units	Unit Cost	Cost of goods available for sale	Nos of units sold	Unit Cost	Cost of goods sold	Nos of units in ending inventory	Unit Cost	Ending inventory
Beginning inventory	3400	$50.00	$170,000	3400	$50.00	$170,000.00	0	$50.00	$0.00
Purchases:
30-Jan	4700	$65.00	$305,500	1830	$65.00	$118,950.00	2870	$65.00	$186,550.00
1-May	3400	$80.00	$272,000	1320	$80.00	$105,600.00	2080	$80.00	$166,400.00
Total	11500		$747,500	6550		$394,550.00	4950		$352,950.00