Question

Problem 6-4AA Periodic: Alternative cost flows LO P3

Montoure Company uses a periodic inventory system. It entered into the following calendar-year purchases and sales transactions.
  

Date

Activities

Units Acquired at Cost

Units Sold at Retail

Jan.

1

Beginning inventory

790

units

@ $85.00 per unit

Feb.

10

Purchase

495

units

@ $82.00 per unit

Mar.

13

Purchase

295

units

@ $67.00 per unit

Mar.

15

Sales

895

units

@ $115.00 per unit

Aug.

21

Purchase

290

units

@ $90.00 per unit

Sept.

5

Purchase

690

units

@ $86.00 per unit

Sept.

10

Sales

1,060

units

@ $115.00 per unit

Totals

2,560

units

1,955

units

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

  
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 units sold consist of 790 units from beginning inventory, 205 from the February 10 purchase, 295 from the March 13 purchase, 145 from the August 21 purchase, and 520 from the September 5 purchase. (Round your average cost per unit to 2 decimal places. Round your final answers to the nearest whole dollar amount.)
  


4. Compute gross profit earned by the company for each of the four costing methods. (Round your average cost per unit to 2 decimal places. Round your final answers to the nearest whole dollar amount.)

Answer 1

Answer to Part 1.

Cost of Goods available for Sale = Cost of Beginning Inventory + Cost of Purchases

Cost of Beginning Inventory = 790 * $85.00 = $67,150

Cost of Purchases = (495 * $82.00) + (295 * $67.00) + (290 * $90.00) + (690 * $86.00)
Cost of Purchases = $40,590 + $19,765 + $26,100 + $59,340
Cost of Purchases = $145,795

Cost of Goods available for Sale = $67,150 + $145,795
Cost of Goods available for Sale = $212,945

Number of Units available for Sale = Beginning Inventory Units + Units Purchased
Units Purchased = 495 + 295 + 290 + 690
Units Purchased = 1,770 Units

Number of Units available for Sale = 790 + 1,770
Number of Units available for Sale = 2,560 Units

Answer to Part 2.

Number of Units in Ending Inventory = Units available for Sale – Units Sold
Units Sold = 895+ 1,060 = 1,955 Units

Number of Units in Ending Inventory = 2,560 – 1,955
Number of Units in Ending Inventory = 605 units

Answer to Part 3.