3 questions total NEED THIS DONE IN 4 HOURS
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acct550_week_5_practice_question_solutions.docxPractice Question Solutions
EXERCISE 8-14 (20–25 minutes)
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(a) |
(1) |
LIFO |
600 @ $6.00 = |
$3,600 |
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100 @ $6.08 = |
608 |
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$4,208 |
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(2) |
Average cost |
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Total cost |
= |
$33,655* |
= $6.35 average cost per unit |
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Total units |
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5,300 |
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700 @ $6.35 = $4,445 |
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*Units |
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Price |
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Total Cost |
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600 |
@ |
$6.00 |
= |
$ 3,600 |
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1,500 |
@ |
$6.08 |
= |
9,120 |
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800 |
@ |
$6.40 |
= |
5,120 |
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1,200 |
@ |
$6.50 |
= |
7,800 |
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700 |
@ |
$6.60 |
= |
4,620 |
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500 |
@ |
$6.79 |
= |
3,395 |
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5,300 |
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$33,655 |
EXERCISE 8-14 (Continued)
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(b) |
(1) |
FIFO |
500 @ $6.79 = |
$3,395 |
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200 @ $6.60 = |
1,320 |
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$4,715 |
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(2) |
LIFO |
100 @ $6.00 = |
$ 600 |
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100 @ $6.08 = |
608 |
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500 @ $6.79 = |
3,395 |
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$4,603 |
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(c) |
Total merchandise available for sale |
$33,655 |
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Less: Inventory (FIFO) |
4,715 |
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Cost of goods sold |
$28,940 |
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(d) |
FIFO |
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EXERCISE 8-16 (15–20 minutes)
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(a) |
(1) |
2,100 units available for sale – 1,400 units sold = 700 units in the ending inventory. |
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500 @ $4.58 = |
$2,290 |
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200 @ 4.60 = |
920 |
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700 |
$3,210 |
Ending inventory at FIFO cost. |
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(2) |
100 @ $4.10 = |
$ 410 |
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600 @ 4.20 = |
2,520 |
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700 |
$2,930 |
Ending inventory at LIFO cost. |
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(3) |
$9,240 cost of goods available for sale ÷ 2,100 units available for sale = $4.40 weighted-average unit cost. |
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700 units X $4.40 = $3,080 Ending inventory at weighted-average cost. |
EXERCISE 8-16 (Continued)
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(b) |
(1) |
LIFO will yield the lowest gross profit because this method will yield the highest cost of goods sold figure in the situation presented. The company has experienced rising purchase prices for its inventory acquisitions. In a period of rising prices, LIFO will yield the highest cost of goods sold because the most recent purchase prices (which are the higher prices in this case) are used to price cost of goods sold while the older (and lower) purchase prices are used to cost the ending inventory. |
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(2) |
LIFO will yield the lowest ending inventory because LIFO uses the oldest costs to price the ending inventory units. The company has experienced rising purchase prices. The oldest costs in this case are the lower costs. |
EXERCISE 9-19 (12–17 minutes)
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Cost |
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Retail |
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Beginning inventory |
$ 200,000 |
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$ 280,000 |
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Purchases |
1,375,000 |
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2,140,000 |
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Totals |
1,575,000 |
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2,420,000 |
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Add: Net markups |
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Markups |
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$95,000 |
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Markup cancellations |
_________ |
(15,000) |
80,000 |
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Totals |
$1,575,000 |
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2,500,000 |
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Deduct: Net markdowns |
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Markdowns |
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35,000 |
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Markdowns cancellations |
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(5,000) |
30,000 |
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Sales price of goods available |
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2,470,000 |
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Deduct: Sales revenue |
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2,200,000 |
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Ending inventory at retail |
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$ 270,000 |
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Cost-to-retail ratio = |
$1,575,000 |
= 63% |
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$2,500,000 |
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Ending inventory at cost = 63% X $270,000 = $170,100
