Question

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

210

units

@ $53.20 per unit

Mar.

5

Purchase

280

units

@ $58.20 per unit

Mar.

9

Sales

370

units

@ $88.20 per unit

Mar.

18

Purchase

140

units

@ $63.20 per unit

Mar.

25

Purchase

260

units

@ $65.20 per unit

Mar.

29

Sales

240

units

@ $98.20 per unit

Totals

890

units

610

units

Problem 5-1A Part 3

1. 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 120 units from beginning inventory and 250 units from the March 5 purchase; the March 29 sale consisted of 100 units from the March 18 purchase and 140 units from the March 25 purchase.

4. Compute gross profit earned by the company for each of the four costing methods. For specific identification, the March 9 sale consisted of 120 units from beginning inventory and 250 units from the March 5 purchase; the March 29 sale consisted of 100 units from the March 18 purchase and 140 units from the March 25 purchase

Answer 1

	Ending inventory units = Total units available - Total units sold
	Purchase date	Units available (a)	Sold units (b)	Ending inventory (a-b)
	1-Mar	210	120	90
	5-Mar	280	250	30
	18-Mar	140	100	40
	25-Mar	260	140	120
Ans. 4			FIFO	LIFO	Weighted average	Specific identification
	Sales	$56,202	$56,202	$56,202	$56,202
	(-) Cost of goods sold	-$35,052	-$36,732	-$35,754	-$36,382
	Gross margin	$21,150	$19,470	$20,448	$19,820
	*Calculation of sales:
	Date	Units	Rate	Total
	9-Mar	370	$88.20	$32,634
	29-Mar	240	$98.20	$23,568
	Total sales			$56,202