Question

Use the following information for the Exercises below. (The following information applies to the questions displayed below.] Laker Company reported the following January purchases and sales data for its only product. Date Activities Jan. 1 Beginning inventory Jan. 10 Sales Jan. 20 Purchase Jan. 25 Sales Jan. 30 Purchase Totals Units Acquired at Cost Units sold at Retail 150 units@ $7.50 = $1,125 110 units @ $16.50 80 units@ $6.50 = 520 90 units @ $16.50 200 units@ $6.00 = 1,200 430 units $2,845 200 units The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 230 u 200 are from the January 30 purchase, 5 are from the January 20 purchase, and 25 are from beginning invento Exercise 5-3 Perpetual: Inventory costing methods LO P1 Required: 1. Complete the table to determine the cost assigned to ending inventory and cost of goods sold using specific identit 2. Determine the cost assigned to ending inventory and to cost of goods sold using weighted average. 3. Determine the cost assigned to ending inventory and to cost of goods sold using FIFO. 4. Determine the cost assigned to ending inventory and to cost of goods sold using LIFO.

Answer 1

1) Specific identification method:

Specific identification method	Purchase			Issue			Balance			Sales Revenue & Profit
Date	Unit	Rate	Amount	Unit	Rate	Amount	Unit	Rate	Amount	Unit	Rate	Sales Revenue	Profit
01-01-2020	150	7.5	1125				150	7.5	1125
10-01-2020				110	7.5	825	40	7.5	300	110	16.5	1815	990
20-01-2020	80	6.5	520				40	7.5	300
							80	6.5	520
25-01-2020				15	7.5	112.5	25	7.5	187.5	15	16.5	247.5	135
25-01-2020				75	6.5	487.5	5	6.5	32.5	75	16.5	1237.5	750
30-01-2020	200	6	1200				25	7.5	187.5
							5	6.5	32.5
							200	6	1200
Total	430		2845	200		1425	230		1420	200		3300	1875

• Amount = unit x rate
• Sales revenue = unit x sales price
• Profit = Sales revenue - cost of sales
• Amount column of Issue section shows the cost of units sold
• Balance = Opening inventory Units purchased till date - units sold till date

2) Weighted average method:

Weighted Average Method	Purchase			Issue			Balance			Sales Revenue & Profit
Date	Unit	Rate	Amount	Unit	Rate	Amount	Unit	Rate	Amount	Unit	Rate	Sales Revenue	Profit
01-01-2020	150	7.5	1125				150	7.5	1125
10-01-2020				110	7.5	825	40	7.5	300	110	16.5	1815	990
20-01-2020	80	6.5	520				120	6.833333333	820
25-01-2020				15	6.833333	102.5	105	6.833333333	717.5	15	16.5	247.5	145
25-01-2020				75	6.833333	512.5	30	6.833333333	205	75	16.5	1237.5	725
30-01-2020	200	6	1200				230	6.108695652	1405
Total	430		2845	200		1440	230		1405	200		3300	1860

In this method all the units are considered to have a weighted average cost

• So for example, on 20th Jan, we had 40 units bought at 7.5 and 80 at 6.5, the cost of them is 300 and 520 respectively, so the total number of units is 40+80 = 120 and total cost = 300+520= 820. therefore the weighted average rate = 820/120= 6.83333
• Similarly the rate is found every time units are purchased or sold.

3) Under FIFO, the oldest units are sold first

FIFO	Purchase			Issue			Balance			Sales Revenue & Profit
Date	Unit	Rate	Amount	Unit	Rate	Amount	Unit	Rate	Amount	Unit	Rate	Sales Revenue	Profit
01-01-2020	150	7.5	1125				150	7.5	1125
10-01-2020				110	7.5	825	40	7.5	300	110	16.5	1815	990
20-01-2020	80	6.5	520				40	7.5	300
							80	6.5	520
25-01-2020				40	7.5	300	30	6.5	195	90	16.5	1485	697.5
25-01-2020				50	6.5	487.5
30-01-2020	200	6	1200				30	6.5	195
							200	6	1200
Total	430		2845	200		1612.5	230		1395	200		3300	1687.5

4) Under LIFO the units purchased in the last are sold first:

LIFO	Purchase			Issue			Balance			Sales Revenue & Profit
Date	Unit	Rate	Amount	Unit	Rate	Amount	Unit	Rate	Amount	Unit	Rate	Sales Revenue	Profit
01-01-2020	150	7.5	1125				150	7.5	1125
10-01-2020				110	7.5	825	40	7.5	300	110	16.5	1815	990
20-01-2020	80	6.5	520				40	7.5	300
							80	6.5	520
25-01-2020				80	6.5	520	30	7.5	225	90	16.5	1485	477.5
25-01-2020				10	7.5	487.5
30-01-2020	200	6	1200				30	7.5	225
							200	6	1200
Total	430		2845	200		1832.5	230		1425	200		3300	1467.5