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

160

units

@ $52.20 per unit

Mar.

5

Purchase

255

units

@ $57.20 per unit

Mar.

9

Sales

320

units

@ $87.20 per unit

Mar.

18

Purchase

115

units

@ $62.20 per unit

Mar.

25

Purchase

210

units

@ $64.20 per unit

Mar.

29

Sales

190

units

@ $97.20 per unit

Totals

740

units

510

units

2. Compute the number of units in ending inventory.
3. 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 95 units from beginning inventory and 225 units from the March 5 purchase; the March 29 sale consisted of 75 units from the March 18 purchase and 115 units from the March 25 purchase.

Answer 1

Ans. 2	Ending inventory units = Units available for sale - Total units sold
	740 - 510
	230 units
Ans. 3 a	Perpetual FIFO:
	Purchase				Cost of goods sold			Balance
	Date	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
	1-Mar	160	$52.20	$8,352				160	$52.20	$8,352
	5-Mar	255	$57.20	$14,586				160	$52.20	$8,352
								255	$57.20	$14,586
	9-Mar				160	$52.20	$8,352
					160	$57.20	$9,152	95	$57.20	$5,434
	18-Mar	115	$62.20	$7,153				95	$57.20	$5,434
								115	$62.20	$7,153
	25-Mar	210	$64.20	$13,482				95	$57.20	$5,434
								115	$62.20	$7,153
								210	$64.20	$13,482
	29-Mar				95	$57.20	$5,434
					95	$62.20	$5,909	20	$62.20	$1,244
								210	$64.20	$13,482
	Total				Cost of goods sold		$28,847	Ending inventory		$14,726
	*In FIFO method the units that have purchased first, are released the first one and the ending inventory
	units remain from the last purchases.
Ans. 3 b	LIFO:
	Purchase				Cost of goods sold			Balance
	Date	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
	1-Mar	160	$52.20	$8,352				160	$52.20	$8,352
	5-Mar	255	$57.20	$14,586				160	$52.20	$8,352
								255	$57.20	$14,586
	9-Mar				255	$57.20	$14,586
					65	$52.20	$3,393	95	$52.20	$4,959
	18-Mar	115	$62.20	$7,153				95	$52.20	$4,959
								115	$62.20	$7,153
	25-Mar	210	$64.20	$13,482				95	$52.20	$4,959
								115	$62.20	$7,153
								210	$64.20	$13,482
	29-Mar				190	$64.20	$12,198	95	$52.20	$4,959
								115	$62.20	$7,153
								20	$64.20	$1,284
	Total				Cost of goods sold		$30,177	Ending inventory		$13,396
	*In LIFO method the units that have purchased last, are released the first one and the ending inventory
	units remain from the first purchases.
Ans. 3 c	Weighted Average
	Purchase				Cost of goods sold			Balance
	Date	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
	1-Mar	160	$52.20	$8,352				160	$52.20	$8,352
	5-Mar	255	$57.20	$14,586				415	$55.27	$22,938
	9-Mar				320	$55.27	$17,687	95	$55.27	$5,251
	18-Mar	115	$62.20	$7,153				210	$59.07	$12,404
	25-Mar	210	$64.20	$13,482				420	$61.63	$25,886
	29-Mar				190	$61.63	$11,710	230	$61.63	$14,176
	Total				Cost of goods sold		$29,397	Ending inventory		$14,176
	*Weighted average rate is calculated by using the formula of (Total available balance / Total units available).
Ans. 3 d	Specific Identification:
		Available for sale				Cost of goods sold			Ending inventory
	Purchase date	Activity	Units	Rate	Cost	Units	Rate	Cost	Units	Rate	Cost
	1-Mar	Beginning inventory	160	$52.20	$8,352	95	$52.20	$4,959	65	$52.20	$3,393
	5-Mar	Purchases	255	$57.20	$14,586	225	$57.20	$12,870	30	$57.20	$1,716
	18-Mar	Purchases	115	$62.20	$7,153	75	$62.20	$4,665	40	$62.20	$2,488
	25-Mar	Purchases	210	$64.20	$13,482	115	$64.20	$7,383	95	$64.20	$6,099
	Total					Cost of goods sold		$29,877	Ending inventory		$13,696
	Ending inventory units = Total units available - Total units sold
	Purchase date	Units available (a)	Sold units (b)	Ending inventory (a-b)
	1-Mar	160	95	65
	5-Mar	255	225	30
	18-Mar	115	75	40
	25-Mar	210	115	95