Question

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

220

units

@ $53.40 per unit

Mar.

5

Purchase

285

units

@ $58.40 per unit

Mar.

9

Sales

380

units

@ $88.40 per unit

Mar.

18

Purchase

145

units

@ $63.40 per unit

Mar.

25

Purchase

270

units

@ $65.40 per unit

Mar.

29

Sales

250

units

@ $98.40 per unit

Totals

920

units

630

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 125 units from beginning inventory and 255 units from the March 5 purchase; the March 29 sale consisted of 105 units from the March 18 purchase and 145 units from the March 25 purchase.

	Specific Identification: Goods Purchased Cost of Goods Sold Inventory Balance Date # of units Cost per unit # of units sold Cost per unit Cost of Goods Sold # of units Cost per unit Inventory Balance March 1 220 @ $53.40 = $11,748.00 March 5 March 9 March 18 March 25 March 29 Totals

Answer 1

Specific identification Goods Purchased # of Units Cost per unit Cost of goods sold Cost per unit # of units sold Date 1-Mar Cost of goods sold 3 Ans. D 4 5 6 7 8 9 0 5-Mar 285 $58.40 9-Mar 125 255 $53.40 $58.40 $6,675 $14,892 # of Units 220 220 285 95 30 95 30 145 95 30 1 18-Mar 145 $63.40 2 Inventory Balance Cost per unit Inventory Balance $53.40 $11,748 $53.40 $11,748 $58.40 $16,644 $53.40 $5,073 $58.40 $1,752 $53.40 $5,073 $58.40 $1,752 $63.40 $9,193 $53.40 $5,073 $58.40 $1,752 $63.40 $9,193 $65.40 $17,658 $53.40 $5,073 $58.40 $1,752 $63.40 $2,536 $65.40 $8,175 25-Mar 270 $65.40 3 4 5 6 145 7 29-Mar 8 9 105 145 $63.40 $65.40 $6,657 $9,483 270 95 30 40 125 0 1 2 3 4 Total Cost of goods sold $37,707 Ending inventory $17,536

Ending inventory units = Total units available - Total units sold
Purchase date	Units available for sale (a)	Units sold (b)	Ending inventory units(a-b)
1-Mar	220	125	95
5-Mar	285	255	30
18-Mar	145	105	40
25-Mar	270	145	125

*Calculations for ending inventory under FIFO, LIFO & Weighted average method is as follows :

1 Ans. A 2 Perpetual FIFO: Goods Purchased # of Units Cost per unit Cost of goods sold Cost per unit 3 # of units sold Date 1-Mar Cost of goods sold # of Units 220 220 285 Inventory Balance Cost per unit Inventory Balance $53.40 $11,748 $53.40 $11,748 $58.40 $16,644 5-Mar 285 $58.40 9-Mar 220 160 $53.40 $58.40 $11,748 $9,344 18-Mar 145 $63.40 125 125 145 125 145 270 $58.40 $58.40 $63.40 $58.40 $63.40 $65.40 $7,300 $7,300 $9,193 $7,300 $9,193 $17,658 25-Mar 270 $65.40 29-Mar 125 125 $58.40 $63.40 $7,300 $7,925 20 $63.40 270 $65.40 Ending inventory $1,268 $17,658 $18,926 Total Cost of goods sold $36,317 *In the FIFO method of inventory costing the units that have purchased first, are released the first one and the ending inventory units remain from the last purchases. 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 0 1 2 Ans. B 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 Perpetual LIFO: Goods Purchased # of Units Cost per unit Cost of goods sold Cost per unit # of units sold Cost of goods sold Date 1-Mar 5-Mar # of Units 220 220 Inventory Balance Cost per unit Inventory Balance $53.40 $11,748 $53.40 $11,748 $58.40 $16,644 285 $58.40 285 9-Mar 285 $58.40 $53.40 $16,644 $5,073 95 18-Mar 145 $63.40 25-Mar 270 $65.40 125 $53.40 125 $53.40 145 $63.40 125 $53.40 145 $63.40 270 $65.40 125 $53.40 145 $63.40 20 $65.40 Ending inventory $6,675 $6,675 $9,193 $6,675 $9,193 $17,658 $6,675 $9,193 $1,308 $17,176 29-Mar 250 $65.40 $16,350 Total Cost of goods sold $38,067 *In the LIFO method of inventory costing the units that have purchased last, are released the first one and the ending inventory units remain from the first purchases.

Ans. C Weighted Average : Goods Purchased # of Units Cost per unit Cost of goods sold Cost per unit # of units sold Cost of goods sold Date 1-Mar 5-Mar 285 $58.40 Average 9-Mar 18-Mar 380 $56.22 $21,364 Inventory Balance Cost per unit Inventory Balance $53.40 $11,748 $53.40 $11,748 $58.40 $16,644 $56.22 $28,392 $56.22 $7,028 $56.22 $7,028 $63.40 $9,193 $60.08 $16,221 $60.08 $16,221 $65.40 $17,658 $62.74 $33,879 $62.74 $18,194 145 # of Units 220 220 285 505 125 125 145 270 270 270 540 290 $63.40 Average 25-Mar 270 $65.40 Average 29-Mar 250 $62.74 $15,685 Total Cost of goods sold $37,049 Ending inventory $18,194 *Weighted average rate is calculated by using the formula of (Total available balance / Total units available). *inventory balance is calculated by average units available from previous transaction Less units sold.
*Inventory balance on each date = Units available on previous date - Units sold on the date