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Q1PSA_3

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Financial & Managerial Accounting
Found in: Page 265
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Warnerwoods Company uses a perpetual inventory system. It entered into the following purchases and sales transactions for March. (For specific identification, the March 9 sale consisted of 80 units from beginning inventory and 340 units from the March 5 purchase; the March 29 sale consisted of 40 units from the March 18 purchase and 120 units from the March 25 purchase.) Date Activities Units Acquired at Cost.

Date

Activities

Units acquired at cost

Units sold at retail

March 1

Beginning inventory

100 units @ $50.00 per unit

March 5

Purchase

400 units @ $55.00 per unit

March 9

Sales

420 units @ $85.00 per unit

March 18

Purchase

120 units @ $60.00 per unit

March 25

Purchase

200 units @ $62.00 per unit

March 29

Sales

160 units @ $95.00 per unit

Total

820 units

580 units

Required

3. Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification. (Round all amounts to cents.)

Method

Ending Inventory

FIFO

$14,800

LIFO

$13,680

Weighted Average

$14,352

Specific Identification

$14,060

See the step by step solution

Step by Step Solution

Step 1: Definition of Specific Identification

The inventory valuation method under which the business entity keeps track of each inventory item for assigning the inventory cost is known as specific identification. Under this method, inventory is not grouped; instead, they are kept individually.

Step 2: FIFO

Date

Beginning inventory/purchasesCost of goods soldEnding inventory

Units

Per unit cost

Total cost

Units

Per unit cost

Total cost

Units

Per unit cost

Total cost

March 1100$50$5000100$50$5000

March 5

400

$55

$22,000

100

$50

$5,000

400

$55

$22,000

March 9

100

$50

$5,000

320

$55

$17,600

80

$55

$4,400

March 18

120

$60

$7,200

80

$55

$4,400

120

$60

$7,200

March 25

200

$62

$12,400

80

$55

$4,400

120

$60

$7,200

200

$62

$12,400

March 29

80

$55

$4,400

80

$60

$4,800

40

$60

$2,400

200

$62

$12,400

$14,800

Step 3: LIFO

DateBeginning inventory/purchasesCost of goods soldEnding inventory
UnitsPer unit costTotal costUnitsPer unit costTotal costUnitsPer unit costTotal cost

March 1

100

$50

$5,000

100

$50

$5,000

March 5

400

$55

$22,000

100

$50

$5,000

400

$55

$22,000

March 9

400

$55

$22,000

20

$50

$1,000

80

$50

$4,000

March 18

120

$60

$7,200

80

$50

$4,000

120

$60

$7,200

March 25

200

$62

$12,400

80

$50

$4,000

120

$60

$7,200

200

$62

$12,400

March 29

160

$62

$9,920

80

$50

$4,000

120

$60

$7,200

40

$62

$2,480

240

$13,680

Step 4: Weighted Average

DateBeginning inventory/purchasesCost of goods soldEnding inventory
UnitsPer unit costTotal costUnitsPer unit costTotal costUnitsPer unit costTotal cost

March 1

100

$50

$5,000

100

$50

$5,000

March 5

400

$55

$22,000

500

$54

$27,000

March 9

420

$54

$22,680

80

54

$4,320

March 18

120

$60

$7,200

200

$57.6

$11,520

March 25

200

$62

$12,400

400

$59.80

$23,920

March 29

160

$59.80

$9,568

240

59.8

$14,352

Step 5: Specific Identification

Particular

Units

x

Per unit Cost

=

Total cost

Beginning inventory

20

x

$50

=

$1,000

March 5

60

x

$55

=

3,300

March 18

80

x

$60

=

4,800

March 25

80

x

$62

=

4,960

Total=$14,060

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