accounting 1

Unit 4 IP Model Problem

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LLK Company reported the following January purchases and sales data for its only product.

Date Jan. 1 Beginning inventory $1,400

Jan. 10 Sales 160 units @ $18.00 = $2,880 Jan. 20 Purchase 1,020 Jan. 25 Sales 100 units @ $18.00 = $1,800 Jan. 30 Purchase 944

510 units $3,364 260 units $4,680

150 units @ $6.80 =

160 units @ $5.90 =

LLK uses a perpetual inventory system. Determine the cost assigned to cost of goods sold using specific identification, weighted average, FIFO, and LIFO.

Units Acquired at Cost Units sold at RetailActivities 200 units @ $7.00 =

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Reminder: Cost of Goods Sold is found by the following formula: Beginning Inventory + Purchases = Cost of Goods Available for Sale – Ending Inventory = Cost of Goods Sold

Date Activity Units Unit Cost

Units Sold

Unit Cost

COGS Ending Inventory

Units

Cost per Unit

Ending Inventory

Cost Jan. 1 Beg. Inv. 200 $7.00 180 $7.00 $1,260 20 $7.00 $140 Jan. 20 Purchase 150 $6.80 80 $6.80 544 70 $6.80 476 Jan. 30 Purchase 160 $5.90 0 $5.90 0 160 $5.90 944

$1,804 $1,560

Beginning inventory $1,400 Purchases 1,964 Cost of goods available for sale 3,364 Ending inventory (1,560) Cost of goods sold $1,804

For specific identification, ending inventory consists of 250 units, where 160 are from the January 30 purchase, 70 are from the January 20 purchase, and 20 are from beginning inventory.

1. Determine the cost assigned to ending inventory and to cost of goods sold using specific identification.

Ending InventoryCost of Goods SoldAvailable for Sale

Total 260 250

Date Jan. 1 Beginning inventory $1,400

Jan. 10 Sales 160 units @ $18.00 = $2,880 Jan. 20 Purchase 1,020 Jan. 25 Sales 100 units @ $18.00 = $1,800 Jan. 30 Purchase 944

510 units $3,364 260 units $4,680

150 units @ $6.80 =

160 units @ $5.90 =

Units Acquired at Cost Units sold at RetailActivities 200 units @ $7.00 =

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2. Determine the cost assigned to ending inventory and to cost of goods sold using perpetual FIFO.

Date Jan. 1 Beginning inventory $1,400

Jan. 10 Sales 160 units @ $18.00 = $2,880 Jan. 20 Purchase 1,020 Jan. 25 Sales 100 units @ $18.00 = $1,800 Jan. 30 Purchase 944

510 units $3,364 260 units $4,680

150 units @ $6.80 =

160 units @ $5.90 =

Units Acquired at Cost Units sold at RetailActivities 200 units @ $7.00 =

Date Units Unit Cost

Units Sold

Unit Cost

COGS # of units Unit Cost

Inventory Balance

Jan. 1 200 $7.00 200 $7.00 $1,400.00 Jan. 10 160 $7.00 $1,120.00 40 $7.00 280.00 Jan. 20 150 $6.80 40 $7.00 280.00

150 $6.80 1,020.00 190 1,300.00

Jan. 25 40 $7.00 280.00 0 $7.00 0.00 60 $6.80 408.00 90 $6.80 612.00

688.00 90 612.00 Jan. 30 160 $5.90 0 $7.00 0.00

90 $6.80 612.00 160 $5.90 944.00

Total $1,808.00 250 $1,556.00

Beginning Inventory $1,400.00 Purchases 1,964.00 Cost of goods available for sale 3,364.00 Ending inventory (1,556.00) Cost of goods sold $1,808.00

Goods purchased Cost of Goods Sold Ending Inventory

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3. Determine the cost assigned to ending inventory and to cost of goods sold using perpetual LIFO.

Date Jan. 1 Beginning inventory $1,400

Jan. 10 Sales 160 units @ $18.00 = $2,880 Jan. 20 Purchase 1,020 Jan. 25 Sales 100 units @ $18.00 = $1,800 Jan. 30 Purchase 944

510 units $3,364 260 units $4,680

150 units @ $6.80 =

160 units @ $5.90 =

Units Acquired at Cost Units sold at RetailActivities 200 units @ $7.00 =

Date Units Unit Cost

Units Sold

Unit Cost

COGS # of units Unit Cost

Inventory Balance

Jan. 1 200 $7.00 200 $7.00 $1,400.00 Jan. 10 160 $7.00 $1,120.00 40 $7.00 280.00 Jan. 20 150 $6.80 40 $7.00 280.00

150 $6.80 1,020.00 190 1,300.00

Jan. 25 40 $7.00 280.00 100 $6.80 680.00 50 $6.80 340.00

90 620.00 Jan. 30 160 $5.90 40 $7.00 280.00

50 $6.80 340.00 160 $5.90 944.00

Total $1,800.00 250 $1,564.00

Beginning Inventory $1,400.00 Purchases 1,964.00 Cost of goods available for sale 3,364.00 Ending inventory (1,564.00) Cost of goods sold $1,800.00

Goods purchased Cost of Goods Sold Ending Inventory

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