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 110 units @ $51.20 per unit 230 units @ $56.20 per unit 270 units @ $86.20 per unit Date Activities Mar. 1 Beginning inventory Mar. 5 Purchase Mar. 9 Sales Mar. 18 Purchase Mar. 25 Purchase Mar. 29 Sales Totals 90 units @ $61.20 per unit 160 units @ $63.20 per unit 140 units @ $96.20 per unit 410 units 590 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 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. (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 I Gross profit

Answer 1

Ans. 4			FIFO	LIFO	Weighted average	Specific identification
	Sales		$36,742	$36,742	$36,742	$36,742
	(-) Cost of goods sold		-$22,842	-$23,822	-$23,242	-$23,572
	Gross profit		$13,900	$12,920	$13,500	$13,170
	*Calculation of sales:
	Date	Units	Rate	Cost
	09-Mar	270	$86.20	$23,274
	29-Mar	140	$96.20	$13,468
	Total sales			$36,742
	*Working Notes:
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.
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.

Quantity Cost of goods sold Rate Total cost Quantity 110 230 Purchase Rate $51.20 $56.20 Total cost $5,632 $12,926 Weighted Average Date 01-Mar 05-Mar 09-Mar 18-Mar 25-Mar 29-Mar Quantity 110 340 70 160 320 Balance Rate $51.20 $54.58 $54.58 $58.31 $60.75 $60.75 270 $54.58 $ 14,737 Total cost $5,632 $18,558 $3,821 9329 19441 $10,936 90 $61.20 $63.20 160 $5,508 $10,112 140 $60.75 $8,505 180 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). 40 Specific Identification: Available for sale Purchase date Activity Units Rate 01-Mar Beginning inventory 110 $51.20 05-Mar Purchases 230 $56.20 18-Mar Purchases $61.20 25-Mar Purchases 160 $63.20 Total Ending inventory units = Total units available - Total units sold Cost $5,632 $12,926 $5,508 $10,112 Cost of goods sold Units Rate 70 $51.20 200 $56.20 50 $61.20 90 $63.20 Cost of goods sold Cost $3,584 $11,240 $3,060 $5,688 $23,572 Ending inventory Units Rate $51.20 30 $56.20 40 $61.20 70 $63.20 Ending inventory Cost $2,048 $1,686 $2,448 $4,424 $10,606 90 Sold units (b) Ending inventory (a-b) 70 Purchase date 01-Mar 05-Mar 18- Mar 25-Mar Units available (a) 110 230 90 160 200