Question

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

150

units

@ $40 per unit

Mar.

5

Purchase

450

units

@ $45 per unit

Mar.

9

Sales

470

units

@ $75 per unit

Mar.

18

Purchase

220

units

@ $50 per unit

Mar.

25

Purchase

300

units

@ $52 per unit

Mar.

29

Sales

260

units

@ $85 per unit

Totals

1,120

units

730

units

For specific identification, the March 9 sale consisted of 40 units from beginning inventory and 430 units from the March 5 purchase; the March 29 sale consisted of 90 units from the March 18 purchase and 170 units from the March 25 purchase.

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. (Round your average cost per unit to 2 decimal places.)

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

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	150	$40.00	$6,000	40	$40.00	$1,600	110	$40.00	$4,400
	5-Mar	Purchases	450	$45.00	$20,250	430	$45.00	$19,350	20	$45.00	$900
	18-Mar	Purchases	220	$50.00	$11,000	90	$50.00	$4,500	130	$50.00	$6,500
	25-Mar	Purchases	300	$52.00	$15,600	170	$52.00	$8,840	130	$52.00	$6,760
	Total					Cost of goods sold	$34,290	Ending inventory	$18,560
	Ending inventory units = Total units available - Total units sold
	Purchase date	Units available (a)	Sold units (b)	Ending inventory (a-b)
	1-Mar	150	40	110
	5-Mar	450	430	20
	18-Mar	220	90	130
	25-Mar	300	170	130
Ans. 4			FIFO	LIFO	Weighted average	Specific identification
	Sales	$57,350	$57,350	$57,350	$57,350
	(-) Cost of goods sold	-$32,750	-$34,570	-$33,477	-$34,290
	Gross margin	$24,600	$22,780	$23,873	$23,060
	*Calculation of sales:
	Date	Units	Rate	Cost
	9-Mar	470	$75.00	$35,250
	29-Mar	260	$85.00	$22,100
	Total sales			$57,350