Question

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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

3. Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification. 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.

Answer 1

A). Perpetual FIFO

Date	Purchases	Cost of goods sold	Inventory balances
March 1			100×$50=$5,000
March 5	400×$55=$22,000		100×$50=$5,000 400×$50=$22,000
March 9		100×$50=$5,000 320×$55=$17,600	80×$55=$4,400
March 18	120×$60=$7,200		80×$55=$4,400 120×$60=$7,200
March 25	200×$62=$12,400		80×$55=$4,400 120×$60=$7,200 200×$62=$12,400
March 29		80×$55=$4,400 80×$60=$4,800	40×$60=$2,400 200×$62=$12,400
Total		COGS=$31,800	Ending inventory =$14,800

B.)Perpetual LIFO.

Date	Purchases	Cost of goods sold	Inventory balance
March 1			100×$50=$5,000
March 5	400×$55=$22,000		100×$50=$5,000 400×$55=$22,000
March 9		400×$55=$22,000 20×$50=$1,000	80×$50=$4,000
March 18	120×$60=$7,200		80×$50=$4,000 120×$60=$7,200
March 25	200×$62=$12,400		80×$50=$4,000 120×$60=$7,200 200×$62=$12,400
March 29		160×$62=$9,920	80×$50=$4,000 120×$60=$7,200 40×$62=$2,480
Total		COGS=$32,920	Ending inventory =$13,680

C). Weighted average method

Date	Purchases	Cost of goods sold	Inventory balance
March 1			100×$50=$5,000
March 5	400×$55=$22,000		500×$54=$27,000
March 9		420×$54=$22,680	80×$54=$4,320
March 18	120×$60=$7,200		200×$57.6=$11,520
March 25	200×$62=$12,400		400×$59.8=$23,920
March 29		160×$59.8=$9,568	240×$59.8=$14,352
Total		COGS=$32,248	Ending inventory=$14,352

D). Specific identification method

Date	Purchases	Cost of goods sold	Inventory balance
March 1			100×$50=$5,000
March 5	400×$55=$22,000		100×$50=$5,000 400×$55=$22,000
March 9		80×$50=$4,000 340×$55=$18,700	20×$50=$1,000 60×$55=$3,300
March 18	120×$60=$7,200		20×$50=$1,000 60×$55=$3,300 120×$60=$7,200
March 25	200×$62=$12,400		20×$50=$1,000 60×$55=$3,300 120×$60=$7,200 200×$62=$12,400
March 29		40×$60=$2,400 120×$62=$7,440	20×$50=$1,000 60×$55=$,300 80×$60=$4,800 80×$62=$4,960
Total		COGS=$32,540	Ending inventory =$14,060

_____×_____

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