Learning Objective 2: Compare inventory by three methods) Robinett Camping Surpl
ID: 2581980 • Letter: L
Question
Learning Objective 2: Compare inventory by three methods) Robinett Camping Surplus began April 2016 with 100 tents that cost $15 each. During the month, Robinett Camping Surplus made the following purchases at cost:
April 8 80 tents @ $20 = $1,600
19 140 tents @ $25 = 3,500
26 80 tents @ $30 = 2,400
Robinett Camping Surplus sold 307 tents, and at April 30, the ending inventory consists of 93 tents. The sale price of each tent was $50.
Requirements:
1. Determine the cost of goods sold and ending inventory amounts for April under the average cost, FIFO cost, and LIFO cost. Round average cost per unit to two decimal places, and round all other amounts to the nearest dollar.
2. Explain why cost of goods sold is highest under LIFO. Be specific.
3. Prepare the Camping Surplus income statement for April. Report gross profit. Operating expenses totaled $3,250. Robinett Camping Surplus uses average costing for inventory. The income tax rate is 30%.
Solution:
Req. 1
Inventory
Beg. bal.
(100 units @ $15)
1,500
Purchases:
Apr.
8
(80 units @ $20)
1,600
19
(140 units @ $25)
3,500
Cost of goods sold
26
(80 units @ $30)
2,400
(307 units @ $?)
?
End. bal.
(93 units @ $?)
?
Cost of Goods Sold
Ending Inventory
Average cost
307 × $???* = $
93 × $???* = $
*Average cost
per unit
=
= $
($ + + + )
( + + + )
FIFO
(?? @ $) + (?? @ $)
(?? @ $) +
+ (?? @ $)
= $
(?? @ $)
= $
LIFO
(?? @ $) + (?? @ $) +
(?? @ $) + (?? @ $)
?? @ $
= $
= $
Req. 2
Req. 3
Robinett Camping Surplus
Income Statement
Month Ended April 30, 2016
Sales revenue (?? x $)
Cost of goods sold
Gross profit
-
Operating expenses
Income before income taxes
-
Income tax expense (30%)
Net income
-
Solution:
Req. 1
Inventory
Beg. bal.
(100 units @ $15)
1,500
Purchases:
Apr.
8
(80 units @ $20)
1,600
19
(140 units @ $25)
3,500
Cost of goods sold
26
(80 units @ $30)
2,400
(307 units @ $?)
?
End. bal.
(93 units @ $?)
?
Cost of Goods Sold
Ending Inventory
Average cost
307 × $???* = $
93 × $???* = $
*Average cost
per unit
=
= $
($ + + + )
( + + + )
FIFO
(?? @ $) + (?? @ $)
(?? @ $) +
+ (?? @ $)
= $
(?? @ $)
= $
LIFO
(?? @ $) + (?? @ $) +
(?? @ $) + (?? @ $)
?? @ $
= $
= $
Req. 2
Req. 3
Robinett Camping Surplus
Income Statement
Month Ended April 30, 2016
Sales revenue (?? x $)
Cost of goods sold
Gross profit
-
Operating expenses
Income before income taxes
-
Income tax expense (30%)
Net income
-
Explanation / Answer
REQ 1
Valuation of Closing Inventory under Average Cost
Calculation of COGS
REQ 2
Since LIFO assigns the latest costs of the goods purchased to the cost of goods sold resulting in higher amount of cost of goods sold.
REQ 3
NOTE: COGS is taken as per LIFO method
REQ 1
Valuation of Closing Inventory under Average Cost
Date Quantity Rate Amount 1-Apr 100 15 1500 8-Apr 80 20 1600 19-Apr 140 25 3500 26-Apr 80 30 2400 400 9000 Weighted avg cost 22.5 Closing Stock Value = 93 x 22.5 2092.5 Valuation of Closing Inventory under FIFO Since old stock are sold first therefore all closing units will be valued at last two rates 13 tents @ Rs 25 325 80 tents @ Rs 30 2400 2725 Valuation of Closing Inventory under LIFO Since new stock are sold first therefore all closing units will be valued at first rate i.e rate of op. stock 93 tents @ Rs15 1395 1395Related Questions
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