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 90 units @ $50.80 per unit 220 units @ $55.80 per unit 250 units @ $85.80 per unit Date Activities Mar. 1 Beginning inventory Mar. 5 Purchase Mar. 9 Sales Mar. 18 Purchase Mar. 25 Purchase Mar. 29 Sales Totals 80 units @ $60.80 per unit 140 units @ $62.80 per unit 120 units @ $95.80 per unit 370 units 530 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 60 units from beginning inventory and 190 units from the March 5 purchase; the March 29 sale consisted of 40 units from che March 18 purchase and 80 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			FIFO	LIFO	Avg. Cost	Spec. ID
	Sales	$32,946	$32,946	$32,946	$32,946
	(-) Cost of goods sold	-$20,496	-21336	-20837	-21106
	Gross margin	$12,450	$11,610	$12,109	$11,840
	*Calculation of sales:
	Date	Units	Rate	Cost
	09-Mar	250	$85.80	$21,450
	29-Mar	120	$95.80	$11,496
	Total sales			$32,946
	*WORKING NOTES:
Ans. a	Perpetual FIFO:
	Purchase	Cost of goods sold	Balance
	Date	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
	01-Mar	90	$50.80	$4,572				90	$50.80	$4,572
	05-Mar	220	$55.80	$12,276				90	$50.80	$4,572
								220	$55.80	$12,276
	09-Mar				90	$50.80	$4,572
					160	$55.80	$8,928	60	$55.80	$3,348
	18-Mar	80	$60.80	$4,864				60	$55.80	$3,348
								80	$60.80	$4,864
	25-Mar	140	$62.80	$8,792				60	$55.80	$3,348
								80	$60.80	$4,864
								140	$62.80	$8,792
	29-Mar				60	$55.80	$3,348
					60	$60.80	$3,648	20	$60.80	$1,216
								140	$62.80	$8,792
	Total				Cost of goods sold	$20,496	Ending inventory	$10,008
	*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. b LIFO: Purchase Quantity Cost of goods sold Rate Quantity Total cost Quantity Date 01-Mar 05-Mar 90 Rate $50.80 $55.80 Total cost $4,572 $12,276 90 Balance Rate $50.80 $50.80 $55.80 Total cost $4,572 $4,572 $12,276 220 90 220 09-Mar 220 30 $55.80 $50.80 $12,276 $1,524 18-Mar 80 $60.80 $4,864 80 25-Mar 140 $62.80 $8,792 80 60 $50.80 60 $50.80 $ 60.80 60 $50.80 $60.80 140 $62.80 60 $50.80 80 $60.80 20 $62.80 Ending inventory $3,048 $3,048 $4,864 $3,048 $4,864 $8,792 $3,048 $4,864 $1,256 $9,168 29-Mar 120 $62.80 $7,536 $21,336 Total Cost of goods sold *In LIFO method the units that have purchased last are released the first one and the ending inventory units remain from the first purchases.

Ans. C Cost of goods sold Rate Quantity Quantity Total cost Quantity Purchase Rate $50.80 $55.80 90 Total cost $4,572 $12,276 90 Weighted Average Date 01-Mar 05-Mar 09-Mar 18-Mar 25-Mar 29-Mar 220 250 $54.35 $13,587 Balance Rate $50.80 $54.35 $54.35 $58.04 $60.42 $60.42 Total cost $4,572 $16,848 $3,261 8125 16917 $9,667 80 140 310 60 140 280 160 $60.80 $62.80 $4,864 $8,792 120 $60.42 $7,250 Total Cost of goods sold $20,837 Ending inventory $9,667 *Weighted average rate is calculated by using the formula of (Total available balance / Total units available). Ans. d 30 Specific Identification: Available for sale Purchase date Activity Units 01-Mar Beginning inventory 90 05-Mar Purchases 220 18-Mar Purchases 25-Mar Purchases 140 Total Ending inventory units = Total units available - Total units sold Rate $50.80 $55.80 $60.80 $62.80 Cost $4,572 $12,276 $4,864 $8,792 Cost of goods sold Units Rate $50.80 190 $55.80 $60.80 $62.80 Cost of goods sold 30 Cost $3,048 $10,602 $2,432 $5,024 $21,106 Ending inventory Units Rate $50.80 $55.80 40 $60.80 60 $62.80 Ending inventory Cost $1,524 $1,674 $2,432 $3,768 $9,398 80 80 Units available (a) Sold units (b) Ending inventory (a-b) 90 60 Purchase date 01-Mar 05-Mar 18-Mar 25-Mar 30 220 80 140 190 40 Activate Windows Go to Settings to activate Window