Question

Problem 6-2AA Periodic: Alternative cost flows LO P3

[The following information applies to the questions displayed below.]

Warnerwoods Company uses a periodic 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

125

units

@ $60 per unit

Mar.

5

Purchase

425

units

@ $65 per unit

Mar.

9

Sales

445

units

@ $95 per unit

Mar.

18

Purchase

170

units

@ $70 per unit

Mar.

25

Purchase

250

units

@ $72 per unit

Mar.

29

Sales

210

units

@ $105 per unit

Totals

970

units

655

units

For specific identification, the March 9 sale consisted of 80 units from beginning inventory and 365 units from the March 5 purchase; the March 29 sale consisted of 65 units from the March 18 purchase and 145 units from the March 25 purchase.

Problem 6-2AA Part 1

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

Problem 6-2AA Part 2

2. Compute the number of units in ending inventory.

Problem 6-2AA Part 3

3. Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification. (Round your average cost per unit to 2 decimal places.)

Problem 6-2AA Part 4

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 and final answers to nearest whole dollar.)

Answer 1

1) Computation of cost of good available for sale and number of units available for sale :
Particulars	No of units	Cost per unit	Cost of goods available for sale
Beginning inventory	125	60	7500
Purchases :
Mar-05	425	65	27625
Mar-18	170	70	11900
Mar-25	250	72	18000
Total	970		65025
2) Compute the number of units in ending inventory :
Ending inventory = Beginning inventory + purchases - sales				315	Units
	125+425+170+250-445-210
3)…a) Perpetual FIFO :
	Goods purchased			Cost of goods sold			Inventory Balance
Date	No of units	Cost per unit	Amount	No of units	Cost per unit	Amount	No of units	Cost per unit	Amount
Mar-01							125	60	7500
05-Mar	425	65	27625				125	60	7500
							425	65	27625
09-Mar				125	60	7500	0	60	0
				320	65	20800	105	65	6825
18-Mar	170	70	11900				0	60	0
							105	65	6825
							170	70	11900
25-Mar	250	72	18000				0	60	0
							105	65	6825
							170	70	11900
							250	72	18000
29-Mar				105	65	6825	0	60	0
				105	70	7350	0	65	0
							65	70	4550
							250	72	18000
Total				655		42475	315		22550
3)…b)..Perpetual LIFO'
	Goods purchased			Cost of goods sold			Inventory Balance
Date	No of units	Cost per unit	Amount	No of units	Cost per unit	Amount	No of units	Cost per unit	Amount
Mar-01							125	60	7500
05-Mar	425	65	27625				125	60	7500
							425	65	27625
09-Mar				425	65	27625	0	65	0
				20	60	1200	105	60	6300
18-Mar	170	70	11900				0	65	0
							105	60	6300
							170	70	11900
25-Mar	250	72	18000				0	65	0
							105	60	6300
							170	70	11900
							250	72	18000
29-Mar				210	72	15120	0	65	0
							105	60	6300
							170	70	11900
							40	72	2880
Total				655		43945	315		21080
3)….c).. Perpetual Weighted average
	Goods purchased			Cost of goods sold			Inventory Balance
Date	No of units	Cost per unit	Amount	No of units	Cost per unit	Amount	No of units	Cost per unit	Amount
Mar-01							125	60	7500
05-Mar	425	65	27625				125	60	7500
							425	65	27625
Average cost							550	63.86	35125
09-Mar				445	63.86	28418	105	63.86	6705
18-Mar	170	70	11900				105	63.86	6705
							170	70	11900
Average cost							275	67.65	18605
25-Mar	250	72	18000				105	63.86	6705
							170	70	11900
							250	72	18000
Average cost							525	69.72	36605
29-Mar				210	69.72	14641	315	69.72	21964
Total				655		43059	315		21964
3)….d)..Specific identification method :
	Goods purchased			Cost of goods sold			Inventory Balance
Date	No of units	Cost per unit	Amount	No of units	Cost per unit	Amount	No of units	Cost per unit	Amount
Mar-01							125	60	7500
05-Mar	425	65	27625				125	60	7500
							425	65	27625
09-Mar				80	60	4800	45	60	2700
				365	65	23725	60	65	3900
18-Mar	170	70	11900				45	60	2700
							60	65	3900
							170	70	11900
25-Mar	250	72	18000				45	60	2700
							60	65	3900
							170	70	11900
							250	72	18000
29-Mar				65	70	4550	45	60	2700
				145	72	10440	60	65	3900
							105	70	7350
							105	72	7560
Total				655		43515	315		21510
Under specific identification method, Sales will be done from the units and at a price which will be specificall mentioned in the question itself.
4) Computation of gross profit :
Particulars	FIFO	LIFO	Weighted average	Specific identification method
Sales	64325	64325	64325	64325
Less : Cost of goods sold	42475	43945	43059	43515
Gross profit	21850	20380	21266	20810