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Yang Corporation uses the periodic inventory system. Thefollowing sales and purchases of the same product were made during20x1 at Yang Corporation. The opening inventory consisted of 50units at $2 each.
Purchases | Sales | ||||||
Date | Units | $ per unit | Date | Units | Unit $Price | Total | |
March 15 | 200 | 3 | April 25 | 250* | 5 | ||
June 15 | 600 | 5 | June 30 | 500** | 6 |
*for specific identification, sold 50 units of opening inventoryand 200 units of March 15 purchase
**for specific identification, sold 500 units of June 15purchase
Requirements:
1. Calculate cost of goods sold and the cost of ending inventoryunder FIFO, LIFO, specific identification, and weighted averageinventory cost flow assumptions. Use the student template #1
2. Calculate and compare the effect on profit of the fourinventory cost flow assumptions.
ACT300 Principlesof Accounting I | |||||||||||||
Module 4: Critical ThinkingTemplate Option #1 | |||||||||||||
FIFO | Units | Cost per unit | Sale per Unit | Totals | |||||||||
Beginning Inventory | - | $0.00 | $0.00 | $0 | |||||||||
Purchases and Sales | |||||||||||||
Mar 15-Purchase | - | $0.00 | $0.00 | $0 | Data from the problem | ||||||||
April 25-Sale | - | $0.00 | $0.00 | 0 | The opening inventory consisted of 50 units at $2each. | ||||||||
Jun 15-Purchase | - | $0.00 | $0.00 | 0 | |||||||||
Jun 30-Sale | - | $0.00 | $0.00 | 0 | Purchases | Sales | |||||||
Cost of Goods Available for Sale | - | $0.00 | $0.00 | $0 | Date | Units | $ per unit | Date | Units | Unit $Price | |||
Cost of Goods Sold (COGS) | - | $0.00 | $0.00 | 0 | 15-Mar | 200 | 3 | 25-Apr | 250* | 5 | |||
Ending Inventory | - | $0.00 | $0.00 | $0 | 15-Jun | 600 | 5 | 30-Jun | 500** | 6 | |||
COGS Calculation | Units | COGS | SalesTotals | Gross Profit | |||||||||
Beginning Inventory | - | $0.00 | $0.00 | $0 | |||||||||
Purchases - Mar 15 | - | $0.00 | $0.00 | $0 | |||||||||
Sale - April 25 | - | $0.00 | $0.00 | $0 | |||||||||
Purchases - June 15 | $0.00 | $0.00 | $0 | ||||||||||
Sale - June 30 | $0.00 | $0.00 | $0 | ||||||||||
. | . | ||||||||||||
Totals | - | $0.00 | $0.00 | $0 |
During July 2014, Micanopy, sold 500 units of its productsEmpire for $8,000. The following units were available.
Units Cost
BeginningInventory 200 $2
Purchase1 80 $4
Purchase2 120 $6
Purchase3 300 $9
Purchase4 180 $12
A sale of 500 units was made after purchase 3. Of the unitssold, 200 came from beginning inventory and 300 came from purchase3.
Determine the costs of goods available for sale and endinginventory in units. Then determine the costs that should beassigned to cost of goods sold and ending inventory under ach ofthe following assumptions. (For each alternative, show the grossmargin. Round unit costs to cents and totals to dollars.)
Costs are assigned under the periodic inventory system using a.)the specific identification method, b) the average-cost method, c.)FIFO method and d.) LIFO method
Costs are assigned under the perpetual inventory system usinga.) the average-cost method, b.) the FIFO method, and c) the LIFOmethod
E7A. Periodic and PerpetualSystems and Inventory Costing Methods | ||||||||||||||||
Cost of goods available forsale and ending inventory in units | ||||||||||||||||
Units | Cost | Total | ||||||||||||||
Beginninginventory | 200 | $ 2 | $ 400 | |||||||||||||
Purchase 1 | 80 | 4 | 320 | |||||||||||||
Purchase 2 | 120 | 6 | 720 | |||||||||||||
Purchase 3 | 300 | 9 | 2,700 | |||||||||||||
Purchase 4 | 180 | 12 | 2,160 | |||||||||||||
Cost of goods available forsale | 880 | $6,300 | ||||||||||||||
Sale in units | 500 | |||||||||||||||
Ending inventory inunits | 380 | |||||||||||||||
1. | Periodic inventorysystem | |||||||||||||||
a. | Specific identificationmethod: | |||||||||||||||
Sales | $8,000 | |||||||||||||||
Cost of goods available forsale | ||||||||||||||||
Less endinginventory* | ||||||||||||||||
Cost of goodssold | ||||||||||||||||
Gross margin | $4,900 | |||||||||||||||
* | Purchase 1 | 80 | units |
P7-3 Evaluating Four Alternative Inventory Methods Based on Income and Cash Flow LO7-2, 7-3 | |||||||
At the end of January 2014, the records of Donner Company showed the following for a particular item that sold at $16 per unit: | |||||||
Transactions | Units | Amount | |||||
Inventory, January 1, 2014 | 500 | $ 2,365 | |||||
Purchase, January 12 | 600 | 3,600 | |||||
Purchase, January 26 | 160 | 1,280 | |||||
Sale | (370) | ||||||
Sale | (250) | ||||||
Required: | |||||||
1a. | Compute Cost of Goods Sold under each method of inventory: average cost, FIFO, LIFO, and specific identification. For specific | ||||||
identification, assume that the first sale was selected from the beginning inventory and the second sale was selected from the | |||||||
January 12 purchase. (Round unit price to 2 decimal places. Input all amounts as positive values.) | |||||||
Input areas are shaded. | |||||||
Average Cost | Cost of Good Available for Sale | Cost of Goods Sold | |||||
# of Units | Cost per Unit | Cost of Goods Available for Sale | # of Units Sold | Cost per Unit | Cost of Goods Sold | ||
Beginning inventory | |||||||
Purchases: | |||||||
January 12, 2014 | |||||||
January 26, 2014 | |||||||
Total | |||||||
FIFO | Cost of Goods Available for Sale | Cost of Goods Sold | |||||
# of Units | Cost per Unit | Cost of Goods Available for Sale | # of Units Sold | Cost per Unit | Cost of Goods Sold | ||
Beginning inventory | 500 | $0 | |||||
Purchases: | |||||||
January 12, 2014 | 600 | $0 | |||||
January 26, 2014 | 160 | $0 | |||||
Total | 1,260 | $0 | 0 | ||||
LIFO | Cost of Goods Available for Sale | Cost of Goods Sold | |||||
# of Units | Cost per Unit | Cost of Goods Available for Sale | # of Units Sold | Cost per Unit | Cost of Goods Sold | ||
Beginning inventory | 500 | ||||||
Purchases: | |||||||
January 12, 2014 | 600 | ||||||
January 26, 2014 | 160 | ||||||
Total | 1,260 | $ - | 0 | $ 4,040 | |||
Specific Identification | Cost of Goods Available for Sale | Cost of Goods Sold | |||||
# of Units | Cost per Unit | Cost of Goods Available for Sale | # of Units Sold | Cost per Unit | Cost of Goods Sold | ||
Beginning inventory | 500 | ||||||
Purchases: | |||||||
January 12, 2014 | 600 | ||||||
January 26, 2014 | 160 | ||||||
Total | 1,260 | $ - | 0 | ||||
Required: | |||||||
2a. | FIFO and LIFO, which method would result in the higher pretax income? | ||||||
2b. | FIFO and LIFO, which would result in the higher EPS? | ||||||
3 | FIFO and LIFO, which method would result in the lower income tax expense? Assume a 30 percent average tax rate. | ||||||
4 | FIFO and LIFO, which method would produce the more favorable cash flow? | ||||||