I accidentally did the chapter 6 serial problem instead of this worksheet, and i
ID: 2374962 • Letter: I
Question
I accidentally did the chapter 6 serial problem instead of this worksheet, and it is due today... Please, please, please, help. I am a good 4.0 student that simply made an idiotic mistake. Thanks in advance for any help.
During January, a company that uses a perpetual inventory system had beginning inventory, purchases, and sales as follows:
Units Unit cost
Beggining inventory 100 10
Jan 5 purchased 40 12
Jan 10 sold 60
Jan 15 purchased 70 13
Jan 25 sold 50
** The selling price per unit is $20.
1. Using the perpetual inventory system, calculate the total cost of goods sold for January and cost of the company's January 31st inventory for the following methods. Show all your work using the format used in the text!
a) FIFO
b) LIFO
c) Weighted average
d) Prepare journal entries for the events listed in the question using the amounts calculated using in (a) FIFO method.
2. Using the periodic inventory system, calculate the cost of goods sold for January and cost of the company's January 31st inventory for the following methods. Show all your work using the format provided in the appendix of the chapter in the text!
a) FIFO
b) LIFO
c) Weighted average
3. A company made the following purchases during the year:
Jan 10: 15 units @ 360 each
Mar 25: 25 units @390 each
April 25: 10 units @ 420 each
July 30: 20 units @ 450 each
Oct 10: 15 units @ 480 each
On December 31, there were 28 units in ending inventory. These 28 units consisted of 1 from the January 10 purchase, 2 from the March 15 purchase, 5 from the April 25 purchase, 15 from the July 30 purchase, and 5 from the October 10 purchase. Using perpetual inventory system, calculate the cost goods sold and ending inventory for the year using the specific identification method. Show all your work using the format provided in the text! (Note: Answers do not differ using the periodic inventory system)
4. Monitor Company uses the LIFO method for valuing its ending inventory. The following financial statement information is available for its first year of operation:
Income Statement
For the year ended Dec 31
Sales 50,0000
Cost of goods sold 23,000
Gross profit 27,000
Expenses 13,000
Income before taxes 14,000
Monitor's ending inventory using the LIFO method was $8,200. Monitor's accountant determined that, had the company used FIFO, the ending inventory would have been $8,500.
a) Determine what the income before taxes would have been, had Monitor used the FIFO method of inventory valuation instead of LIFO.
b) What would be the difference in income taxes between LIFO and FIFO, assuming a 30% tax rate?
c) If Monitor wanted to lower the amount of income taxes to be paid, which method would it choose?
Explanation / Answer
Units Cost per unit; Total
Beginning Inventory 100 $10; $1,000
Jan 5 Purchase 40 12; $480
Jan 10 SALE 60 --
Jan 15 Purchase 70 13; $910
Jan 25 SALE 50 --
Total units available for sale: 210 units for a total cost of $2,390
Ending inventory: 100 units. Under FIFO, these must be from the latest purchases, so 70 units x $13 = $910 PLUS 30 units x $12 = $360 gives you ending inventory of $1,270 (Note that under FIFO, results are the same under both periodic or perpetual method, but ONLY under FIFO). COGS under FIFO = $2,390 - $1,270 = $1,120.
Ending inventory: 100 units. Under LIFO, these must be from the earliest purchases, so 100 units x $10 = $1,000. COGS under LIFO = $2,390 - $1,000 = $1,390.
Units Cost per unit; Total
Beginning Inventory 100 $10; $1,000
Jan 5 Purchase 40 12; $480
(At this point, there are 140 units for $1,480, so ave. cost is $10.57)
Jan 10 SALE 60 --
(COGS = 60 units x $10.57 = $634.20; remaining inventory 80 units x $10.57 = $845.60)
Jan 15 Purchase 70 13; $910
(There are now 150 units for $1,755.60, so ave. cost is $11.70)
Jan 25 SALE 50 --
(COGS 50 units x $11.70 = $585; remaining inventory 100 units x $11.70 = $1,170)
Answers under weighted ave. may contain rounding errors due to cutting off after 2 decimal points.
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