Question

Required information Problem 5-1A Perpetual: Alternative cost flows LO P1 [The following information applies to the questions displayed below.] 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 100 units @ $50.00 per unit Mar. 5 Purchase 400 units @ $55.00 per unit Mar. 9 Sales 420 units @ $85.00 per unit Mar. 18 Purchase 120 units @ $60.00 per unit Mar. 25 Purchase 200 units @ $62.00 per unit Mar. 29 Sales 160 units @ $95.00 per unit Totals 820 units 580 units Problem 5-1A Part 4 4. Compute gross profit earned by the company for each of the four costing methods. For specific identification, the March 9 sale consisted of 80 units from beginning inventory and 340 units from the March 5 purchase; the March 29 sale consisted of 40 units from the March 18 purchase and 120 units from the March 25 purchase. (Round weighted average cost per unit to two decimals.) Compute Sales, cost of goods sold, and gross profit in a chart for FIFO, LIFO, average cost, and spec. ID

Answer 1

Solution:

Computation of ending inventory COGS under FIFO
Date	Beginning Inventory			Purchase			Cost of Goods Sold			Ending Inventory
	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount
1-Mar	100	$50.00	$5,000.00	0	$0.00	$0.00	0	$0.00	$0.00	100	$50.00	$5,000.00
5-Mar	100	$50.00	$5,000.00	400	$55.00	$22,000.00	0	$0.00	$0.00	100	$50.00	$5,000.00
										400	$55.00	$22,000.00
9-Mar	100	$50.00	$5,000.00	0	$0.00	$0.00	100	$50.00	$5,000.00	80	$55.00	$4,400.00
	400	$55.00	$22,000.00				320	$55.00	$17,600.00
18-Mar	80	$55.00	$4,400.00	120	$60.00	$7,200.00	0	$0.00	$0.00	80	$55.00	$4,400.00
										120	$60.00	$7,200.00
25-Mar	80	$55.00	$4,400.00	200	$62.00	$12,400.00	0	$0.00	$0.00	80	$55.00	$4,400.00
	120	$60.00	$7,200.00							120	$60.00	$7,200.00
										200	$62.00	$12,400.00
29-Mar	80	$55.00	$4,400.00	0	$0.00	$0.00	80	$55.00	$4,400.00	40	$60.00	$2,400.00
	120	$60.00	$7,200.00				80	$60.00	$4,800.00	200	$62.00	$12,400.00
	200	$62.00	$12,400.00
Total							580		$31,800.00	240		$14,800.00

Computation of ending inventory COGS under LIFO
Date	Beginning Inventory			Purchase			Cost of Goods Sold			Ending Inventory
	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount
1-Mar	100	$50.00	$5,000.00	0	$0.00	$0.00	0	$0.00	$0.00	100	$50.00	$5,000.00
5-Mar	100	$50.00	$5,000.00	400	$55.00	$22,000.00	0	$0.00	$0.00	100	$50.00	$5,000.00
										400	$55.00	$22,000.00
9-Mar	100	$50.00	$5,000.00	0	$0.00	$0.00	400	$55.00	$22,000.00	80	$50.00	$4,000.00
	400	$55.00	$22,000.00				20	$50.00	$1,000.00
18-Mar	80	$50.00	$4,000.00	120	$60.00	$7,200.00	0	$0.00	$0.00	80	$50.00	$4,000.00
										120	$60.00	$7,200.00
25-Mar	80	$50.00	$4,000.00	200	$62.00	$12,400.00	0	$0.00	$0.00	80	$50.00	$4,000.00
	120	$60.00	$7,200.00							120	$60.00	$7,200.00
										200	$62.00	$12,400.00
29-Mar	80	$50.00	$4,000.00	0	$0.00	$0.00	160	$62.00	$9,920.00	80	$50.00	$4,000.00
	120	$60.00	$7,200.00							120	$60.00	$7,200.00
	200	$62.00	$12,400.00							40	$62.00	$2,480.00
Total							580		$32,920.00	240		$13,680.00

Computation of ending inventory COGS under Weighted Average Cost
Date	Beginning Inventory			Purchase			Cost of Goods Sold			Ending Inventory
	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount
1-Mar	100	$50.00	$5,000.00	0	$0.00	$0.00	0	$0.00	$0.00	100	$50.00	$5,000.00
5-Mar	100	$50.00	$5,000.00	400	$55.00	$22,000.00	0	$0.00	$0.00	500	$54.00	$27,000.00
9-Mar	500	$54.00	$27,000	0	$0.00	$0.00	420	$54.00	$22,680.00	80	$54.00	$4,320.00
18-Mar	80	$54.00	$4,320	120	$60.00	$7,200.00	0	$0.00	$0.00	200	$57.60	$11,520.00
25-Mar	200	$57.60	$11,520	200	$62.00	$12,400.00	0	$0.00	$0.00	400	$59.80	$23,920.00
29-Mar	400	$59.80	$23,920	0	$0.00	$0.00	160	$59.80	$9,568.00	240	$59.80	$14,352.00
Total									$32,248.00			$14,352.00

Computation of ending inventory COGS under Specific Identification
Date	Beginning Inventory			Purchase			Cost of Goods Sold			Ending Inventory
	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount
1-Mar	100	$50.00	$5,000.00	0	$0.00	$0.00	0	$0.00	$0.00	100	$50.00	$5,000.00
5-Mar	100	$50.00	$5,000.00	400	$55.00	$22,000.00	0	$0.00	$0.00	100	$50.00	$5,000.00
										400	$55.00	$22,000.00
9-Mar	100	$50.00	$5,000.00	0	$0.00	$0.00	80	$50.00	$4,000.00	20	$50.00	$1,000.00
	400	$55.00	$22,000.00				340	$55.00	$18,700.00	60	$55.00	$3,300.00
18-Mar	20	$50.00	$1,000.00	120	$60.00	$7,200.00	0	$0.00	$0.00	20	$50.00	$1,000.00
	60	$55.00	$3,300.00							60	$55.00	$3,300.00
										120	$60.00	$7,200.00
25-Mar	20	$50.00	$1,000.00	200	$62.00	$12,400.00	0	$0.00	$0.00	20	$50.00	$1,000.00
	60	$55.00	$3,300.00							60	$55.00	$3,300.00
	120	$60.00	$7,200.00							120	$60.00	$7,200.00
										200	$62.00	$12,400.00
29-Mar	20	$50.00	$1,000.00	0	$0.00	$0.00	40	$60.00	$2,400.00	20	$50.00	$1,000.00
	60	$55.00	$3,300.00				120	$62.00	$7,440.00	60	$55.00	$3,300.00
	120	$60.00	$7,200.00							80	$60.00	$4,800.00
	200	$62.00	$12,400.00							80	$62.00	$4,960.00
Total							580		$32,540.00	240		$14,060.00

Computation of Gross Profit
Particulars	FIFO	LIFO	Weighted Average	Specific Identification
Sales	$50,900.00	$50,900.00	$50,900.00	$50,900.00
Cost of goods sold	$31,800.00	$32,920.00	$32,248.00	$32,540.00
Gross Profit (Sales - COGS)	$19,100.00	$17,980.00	$18,652.00	$18,360.00