Title | P6-5A - Homework Solutions |
---|---|
Course | Introduction to Financial Accounting |
Institution | University of Southern California |
Pages | 2 |
File Size | 70.2 KB |
File Type | |
Total Downloads | 95 |
Total Views | 148 |
Homework Solutions...
Chapter 6 P6-5A Date Oct. 1 9 11 17 22 25 29
1 9 11 17 22 25 29
Description Beginning Inventory Purchase Sale Purchase Sale Purchase Sale
Units 60 120 100 100 60 70 110
Unit Cost or Selling Price $24 $26 $35 $27 $40 $29 $40
(a) Calculate (i) ending inventory (ii) cost of goods sold (iii) gross profit and (iv) gross profit rate under each of the following methods a. LIFO i. Ending inventory - $1,960 Purchases COGS Balance (60*24) = 1440 (120*26) = 3120 (3120+1440) = 4560 (100*26) = 2600 (4560-2600) = 1960 (100*27) = 2700 (1960+2700) = 4660 (60*27) = 1620 (4660-1620) = 3040 (70*29) = 2030 (3040+2030) = 5070 (70*29)+(40*27) = 3110 (5070-3110) = 1960 ii. Cost of goods sold - $7,330 iii. Gross profit - $2,970 iv. Gross profit rate – 28.835% GROSS PROFIT/SALES*100 2970/103000 = 0.28835 * 100 b. FIFO i. Ending inventory - $2,300 Purchases COGS
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(120*26) = 3120 (60*24)+(40*26) = 2480 (100*27) = 2700 (60*26) = 1560 (70*29) = 2030 (20*26)+(90*27) = 2950 ii. Cost of goods sold - $6,990 iii. Gross profit - $3,310
Balance 1440 4560 2080 4780 3220 5250 2300
Chapter 6 iv. Gross profit rate – 32.136% 3310/10300 = 0.32136 * 100 c. Average-cost (3 decimal places) i. Ending inventory - $2,133.44 Cost of goods available for sale = $9,290 Total goods available for sale = 350 units Weighted average = 9290/350 = $26.543 80 * 26.543 ii. Cost of goods sold - $7,166.61 270 * 26,563 iii. Gross profit - $3,133 10,300-7,166.61 iv. Gross profit rate – 30.421% 3133.39/10300 = 0.30421 * 100 (b) Compare results for the three cost flow assumptions FIFO provides the highest ending inventory since the most recent purchases at higher prices are included in inventory. Cost of goods sold is also lowest under FIFO resulting in highest gross profit and gross profit rate. LIFO provides lowest ending inventory and gives highest cost of goods sold. LIFO cost of goods sold consists of most recent purchases since the last one purchased are sold first. It results in lowest gross profit and gross profit rate. Average-cost inventory, cost of goods sold, and gross profit fall between FIFO and LIFO values....