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Warnerwoods Company uses a periodic inventory system. It entered into the following purchases and sales transactions...

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.)

Solutions

Expert Solution

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

ekkarill92 answered 1 year ago
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