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.

Date

Activities

Units Acquired at Cost

Units Sold at Retail

Mar.

1

Beginning inventory

110

units

@ $51.20 per unit

Mar.

5

Purchase

230

units

@ $56.20 per unit

Mar.

9

Sales

270

units

@ $86.20 per unit

Mar.

18

Purchase

90

units

@ $61.20 per unit

Mar.

25

Purchase

160

units

@ $63.20 per unit

Mar.

29

Sales

140

units

@ $96.20 per unit

Totals

590

units

410

units

3. Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification. For specific identification, the March 9 sale consisted of 70 units from beginning inventory and 200 units from the March 5 purchase; the March 29 sale consisted of 50 units from the March 18 purchase and 90 units from the March 25 purchase.

Answer 1

Ans. 3 a	Perpetual FIFO:
	Purchase				Cost of goods sold			Balance
	Date	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
	01-Mar	110	$51.20	$5,632				110	$51.20	$5,632
	05-Mar	230	$56.20	$12,926				110	$51.20	$5,632
								230	$56.20	$12,926
	09-Mar				110	$51.20	$5,632
					160	$56.20	$8,992	70	$56.20	$3,934
	18-Mar	90	$61.20	$5,508				70	$56.20	$3,934
								90	$61.20	$5,508
	25-Mar	160	$63.20	$10,112				70	$56.20	$3,934
								90	$61.20	$5,508
								160	$63.20	$10,112
	29-Mar				70	$56.20	$3,934
					70	$61.20	$4,284	20	$61.20	$1,224
								160	$63.20	$10,112
	Total				Cost of goods sold		$22,842	Ending inventory		$11,336
	*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:
	Purchase				Cost of goods sold			Balance
	Date	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
	01-Mar	110	$51.20	$5,632				110	$51.20	$5,632
	05-Mar	230	$56.20	$12,926				110	$51.20	$5,632
								230	$56.20	$12,926
	09-Mar				230	$56.20	$12,926
					40	$51.20	$2,048	70	$51.20	$3,584
	18-Mar	90	$61.20	$5,508				70	$51.20	$3,584
								90	$61.20	$5,508
	25-Mar	160	$63.20	$10,112				70	$51.20	$3,584
								90	$61.20	$5,508
								160	$63.20	$10,112
	29-Mar				140	$63.20	$8,848	70	$51.20	$3,584
								90	$61.20	$5,508
								20	$63.20	$1,264
	Total				Cost of goods sold		$23,822	Ending inventory		$10,356
	*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. 3C	Weighted Average
	Purchase				Cost of goods sold			Balance
	Date	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
	01-Mar	110	$51.20	$5,632				110	$51.20	$5,632
	05-Mar	230	$56.20	$12,926				340	$54.58	$18,558
	09-Mar				270	$54.58	$14,737	70	$54.58	$3,821
	18-Mar	90	$61.20	$5,508				160	$58.31	9329
	25-Mar	160	$63.20	$10,112				320	$60.75	19441
	29-Mar				140	$60.75	$8,505	180	$60.75	$10,936
	Total				Cost of goods sold		$23,242	Ending inventory		$10,936
	*Weighted average rate is calculated by using the formula of (Total available balance / Total units available).

Ans. 3 d Specific Identification: Purchase date 01-Mar 05-Mar 18-Mar 25-Mar Activity Beginning inventory Purchases Purchases Purchases Available for sale Units Rate 110 $51.20 230 $56.20 $61.20 160 $63.20 Cost $5,632 $12,926 $5,508 $10,112 Cost of goods sold Units Rate 70 $51.20 200 $56.20 $61.20 90 $63.20 Cost of goods sold Ending inventory Units Rate 40 $51.20 $56.20 40 $61.20 70 $63.20 Ending inventory 30 Cost $3,584 $11,240 $3,060 $5,688 $23,572 50 Cost $2,048 $1,686 $2,448 $4,424 $10,606 90 Total Ending inventory units = Total units available - Total units sold Purchase date 01-Mar 05-Mar 18-Mar 25-Mar Units available (a) 110 230 Sold units (b) Ending inventory (a-b) 40 200 90 40 160