Question

Required information [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 Units Sold at Retail Units Acquired at Cost 60 units @ $50.20 per unit 205 units @ $55.20 per unit 220 units @ $85.20 per unit Date Activities Mar. 1 Beginning inventory Mar. 5 Purchase Mar. 9 Sales Mar. 18 Purchase Mar. 25 Purchase Mar. 29 Sales Totals 65 units @ $60.20 per unit 110 units @ $62.20 per unit 90 units @ $95.20 per unit 310 units 440 units 4. Compute gross profit earned by the company for each of the four costing methods. For specific identification, the March 9 sale consisted of 45 units from beginning inventory and 175 units from the March 5 purchase, the March 29 sale consisted of 25 units from the March 18 purchase and 65 units from the March 25 purchase. (Round weighted average cost per unit to two decimals and final answers to nearest whole dollar.) FIFO LIFO Avg. Cost Spec. ID Gross Margin Sales Less: Cost of goods sold Gross profit

Answer 1

Ans, 4 Sales (-) Cost of goods sold Gross margin FIFO $27,312 -$17,037 $10,275 LIFO $27,312 -$17,667 $9,645 Weighted average $27,312 -$17,290 $10,022 Specific identification $27,312 -$17,467 $9,845 Cost *Calculation of sales: Date 9-Mar 29-Mar Total sales Units 220 90 Rate $85.20 $95.20 $18,744 $8,568 $27,312 *Working Notes:

Perpetual FIFO: Cost of goods sold Quantity Rate Date Total cost Purchase Quantity Rate 60 $50.20 205 $55.20 1-Mar 5-Mar Total cost $3,012 $11,316 Quantity 60 60 205 Balance Rate $50.20 $50.20 $55.20 Total cost $3,012 $3,012 $11,316 9-Mar 60 $50.20 $55.20 $3,012 $8,832 160 18-Mar 65 $60.20 $3,913 $55.20 $55.20 $60.20 $55.20 $60.20 $62.20 $2,484 $2,484 $3,913 $2,484 $3,913 $6,842 25-Mar 110 $62.20 $6,842 110 29-Mar $55.20 $60.20 $2,484 $2,709 45 20 $60.20 110 $62.20 Ending inventory $1,204 $6,842 $8,046 Total Cost of goods sold $17,037 *In FIFO method the units that have purchased first, are released the first one and the ending inventory units remain from the last purchases.

2) LIFO: Cost of goods sold Quantity Date Rate Total cost Purchase Quantity Rate 60 $50.20 205 $55.20 1-Mar Total cost $3,012 $11,316 Quantity 60 60 205 Balance Rate $50.20 $50.20 $55.20 Total cost $3,012 $3,012 $11,316 5-Mar 9-Mar 205 $55.20 $50.20 $11,316 $753 15 45 18-Mar 65 $60.20 $3,913 25-Mar 110 $62.20 $6,842 $50.20 45 $50.20 65 $60.20 45 $50.20 65 $60.20 110 $62.20 45 $50.20 65 $60.20 20 $62.20 Ending inventory $2,259 $2,259 $3,913 $2,259 $3,913 $6,842 $2,259 $3,913 $1,244 $7,416 29-Mar $62.20 $5,598 Total Cost of goods sold $17,667 *In LIFO method the units that have purchased last, are released the first one and the ending inventory units remain from the first purchases.

Cost of goods sold Quantity Rate Total cost Weighted Average Purchase Date Quantity Rate 1-Mar 60 $50.20 5-Mar 205 $55.20 9-Mar 18-Mar 65 $60.20 25-Mar 110 $62.20 29-Mar Total cost $3,012 $11,316 Balance Rate $50.20 $54.07 $54.07 $57.69 $59.95 $59.95 220 $54.07 Quantity 60 265 45 110 220 130 $11,895 Total cost $3,012 $14,328 $2,433 6346 13188 $7,793 $3,913 $6,842 90 $59.95 $5,395 Total Cost of goods sold $ 17,290 Ending inventory $7,793 *Weighted average rate is calculated by using the formula of (Total available balance / Total units available).

45 15 Specific Identification: Available for sale Purchase date Activity Units Rate 1-Mar Beginning inventory 60 $50.20 5-Mar Purchases 205 $55.20 18-Mar Purchases 65 $60.20 25-Mar Purchases 110 $62.20 Total Ending inventory units = Total units available - Total units sold Cost $3,012 $11,316 $3,913 $6,842 Cost of goods sold Units Rate Cost $50.20 $2,259 175 $55.20 $9,660 25 $60.20 $1,505 $62.20 $4,043 Cost of goods sold $17,467 Ending inventory Units Rate Cost $50.20 $753 30 $55.20 $1,656 40 $60.20 $2,408 $62.20 $2,799 Ending inventory $7,616 65 45 Purchase date Units available (a) Sold units (b) Ending inventory (a-b) 1-Mar 60 45 15 5-Mar 205 175 30 18-Mar 65 25-Mar 110 25