Question

Montoure Company uses a perpetual inventory system. It entered into the following calendar-year purchases and sales transactions

Date

Activities

Units Acquired at Cost

Units Sold at Retail

Jan.

1

Beginning inventory

620

units

@ $45 per unit

Feb.

10

Purchase

310

units

@ $42 per unit

Mar.

13

Purchase

120

units

@ $30 per unit

Mar.

15

Sales

770

units

@ $85 per unit

Aug.

21

Purchase

190

units

@ $50 per unit

Sept.

5

Purchase

520

units

@ $48 per unit

Sept.

10

Sales

710

units

@ $85 per unit

Totals

1,760

units

1,480

units

Perpetual FIFO: Goods Purchased # of Cost per units unit Cost of Goods Sold Cost per cost of Goods Sold Date # of units sold Inventory Balance Cost per Inventory # of units unit Balance 620 @ $ 45.00 = $ 27,900.00 Jan 1 Feb 10 Mar 13 Mar 15 Aug 21 Sept 5 Sept 10 Totals $ 0.00 $ 0.00

Answer 1

Ans. 3 a Perpetual FIFO: Cost of goods sold Rate Quantity Total cost Date 01-Jan 10-Feb Purchase Quantity Rate 620 $45.00 310 $42.00 Total cost $27,900 $13,020 Quantity 620 620 310 Balance Rate $45.00 $45.00 $42.00 $45.00 $42.00 $30.00 Total cost $27,900 $ 27,900 $13,020 $27,900 $13,020 $3,600 13-Mar 120 $30.00 $3,600 120 15-Mar 620 $45.00 $42.00 $27,900 $6,300 150 21-Aug 190 $50.00 $9,500 160 120 160 120 190 $42.00 $30.00 $42.00 $30.00 $50.00 $42.00 $30.00 $50.00 $48.00 $6,720 $3,600 $6,720 $3,600 $9,500 $6,720 $3,600 $9,500 $24,960 05-Sep 520 $48.00 $ 24,960 160 120 190 520 10-Sep 160 120 190 240 $42.00 $30.00 $50.00 $48.00 $6,720 $3,600 $9,500 $11,520 280 $48.00 $13,440 Ending inventory $13,440 Total Cost of goods sold $65,540 *In FIFO method the units that have purchased first (earliest), are released the first one and the ending inventory units remain from the last (recent) purchases.

Ans. 3 b LIFO: Cost of goods sold Rate Quantity Total cost Date 01-Jan 10-Feb Purchase Quantity 620 310 Rate $45.00 $42.00 Total cost $ 27,900 $13,020 Quantity 620 620 310 620 310 120 Balance Rate $45.00 $45.00 $42.00 $45.00 $42.00 $30.00 Total cost $27,900 $27,900 $13,020 $27,900 $13,020 $3,600 13-Mar 120 $30.00 $3,600 15-Mar 120 310 340 $30.00 $42.00 $45.00 $3,600 $13,020 $15,300 21-Aug 190 $50.00 $9,500 280 280 190 280 190 520 $45.00 $45.00 $50.00 $45.00 $50.00 $48.00 $12,600 $12,600 $9,500 $12,600 $9,500 $24,960 05-Sep 520 $48.00 $24,960 10-Sep 520 190 $48.00 $50.00 $24,960 $9,500 280 $45.00 $12,600 Total Cost of goods sold $66,380 Ending inventory $12,600 *In LIFO method the units that have purchased last, are released the first one and the ending inventory units remain from the first purchases.
  
Ending inventory (a-b) 0 100 Purchase date 01-Jan 10-Feb 13-Mar 21-Aug 05-Sep Units available (a) 620 310 120 190 520 Sold units (b) 620 210 120 140 390 130

Ans.4 FIFO LIFO Sales (-) Cost of goods sold Gross margin $125,800 -$65,540 $60,260 $125,800 -$66,380 $59,420 Weighted Average $125,800 $65,876 $59,924 Specific Identification $125,800 $66,040 $59,760 *Calculation of sales: Date 15-Mar 10-Sep Total sales Units 770 710 Rate $85.00 $85.00 Cost $65,450 $60,350 $125,800 Ans. 5 *FIFO inventory method has the highest gross profit so this method will produce the highest bonus for the manager.

Ans. 3c		Goods Purchased		Cost of goods sold			Inventory Balance
	Date	# of	Cost per	# of	Cost per	Cost of goods	# of	Cost per	Inventory
		Units	Unit	Units sold	Unit	Sold	Units	Unit	Balance
	01-Jan						620	$45.00	$27,900
	10-Feb	310	$42.00				620	$45.00	$27,900
							310	$42.00	$13,020
							930	$44.00	$40,920
	13-Mar	120	$30.00				930	$44.00	$40,920
							120	$30.00	$3,600
							1050	$42.40	$44,520
	15-Mar			770	$42	$32,648	1050	$42.40	$44,520
							-770	$42.40	-$32,648
							280	$42.40	$11,872
	21-Aug	190	$50.00				280	$42.40	$11,872
							190	$50.00	$9,500
							470	$45.47	$21,372
	05-Sep	520	$48.00				470	$45.47	$21,372
							520	$48.00	$24,960
							990	$46.80	$46,332
	10-Sep			710	$47	$33,228	990	$46.80	$46,332
							-710	$46.80	-$33,228
							280	$46.80	$13,104
	Total			Cost of goods sold		$65,876	Ending inventory		$13,104
	*Weighted average rate is calculated by using the formula of (Total available balance / Total units available).
	*All purchases are added in inventory balance and a new cost per unit is calculated.
	*Sales are made on the unit cost of inventory balance on previous date.
Ans. 3d	Specific Identification
		Goods Purchased		Cost of goods sold			Inventory Balance
	Date	# of	Cost per	# of	Cost per	Cost of goods	# of	Cost per	Inventory
		Units	Unit	Units sold	Unit	Sold	Units	Unit	Balance
	01-Jan	620	$45.00	620	$45.00	$27,900	0	$45.00	$0
	10-Feb	310	$42.00	210	$42.00	$8,820	100	$42.00	$4,200
	13-Mar	120	$30.00	120	$30.00	$3,600	0	$30.00	$0
	21-Aug	190	$50.00	140	$50.00	$7,000	50	$50.00	$2,500
	05-Sep	520	$48.00	390	$48.00	$18,720	130	$48.00	$6,240
	Total			Cost of goods sold		$66,040	Ending inventory		$12,940
	Ending inventory units = Total units available - Total units sold
	Purchase date	Units available (a)	Sold units (b)	Ending inventory (a-b)
	01-Jan	620	620	0
	10-Feb	310	210	100
	13-Mar	120	120	0
	21-Aug	190	140	50
	05-Sep	520	390	130