In: Accounting
Windward Corporation uses the Specific Identification
inventory method.
The Company has the following inventory items and costs for the
Period.
Beginning inventory of 3 units purchased for $4,100 each.
January 20, purchase 2 units for $4,200 each.
February 3, purchase 3 units for $4,500 each.
February 14, sold 5 units for $5,800 each (3 units from the
beginning Inventory and 2 units from the February 3rd
purchase)
1. What is the total cost of the units in inventory at March 31?
$
2. What is the total Sales for the quarter ending March 31? $
3. What is the Cost of Goods Sold for the quarter ending March 31?
$
4.What is Gross Margin for the quarter ending March 31? $
2. CDM Corporation erroneously included $24,600 of goods
on consignment from another company in ending
inventory.
What effect does this have on the following items? (determine the
amount and use a positive number to designate an overstated amount
and a negative number to designate an understated amount).
a. Ending Inventory $ ???
b. Cost of Goods Sold $ ????
c. Gross Margin $ ???
d. Net Income$ ???
1. Opening Inventory Value = 3*4100 = 12300
Purchase as on Jan 20 and Feb 3 = 2*4200+3*4500= 21900
Total Value of Inventory as on 13 Feb =12300+21900= 34200
Inventory sold on 14 Feb COsting to 3*4100+2*4500= 21300.
Total COst of Inventory remaining = 34200-21300= $12900
2. Total Sale = 5800*5= $29000
3. Cost of Goods Sold = Opening Stock+purchases-Closing Stock= 12300+21900-12900= $21300
4. Gross Margin = Sales-COGS= 29000-21300= $7700
Part 2.
Closing Inventory: Value of closing inventory will increase by $24600 as we are including others inventory in our inventory
COGS: Cogs of good sold will decline due to an increase in the closing stock because we remove closing stock from the cost and if we remove excess closing stock then cost will also decline.
Gross margin: Since we will show less cost, gross margin will increase.
Net Income: Net Income will increase as we are showing an excess gross profit.
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