Accounting for inventory using the perpetual inventory system—
FIFO, LIFO, and weighted-average, and comparing FIFO, LIFO, and weighted-average Steel Mill began August with 50 units of iron inventory that cost $35 each. During August, the company completed the following inventory transactions:
Units Unit Cost Unit Sales Price
Aug. 3 Sale 45 $ 85
8 Purchase 90 $ 54
21 Sale 85 88
30 Purchase 15 58
4. Determine the company’s cost of goods sold for August using FIFO, LIFO, and weighted-average inventory costing methods.
The COGs under FIFO, LIO, and average cost methods are - $6070, $6165, and $6,080 respectively.
The cost of goods sold is the cost of issuing stock valued under the four methods namely – FIFO, LIFO, Average cost, and specific identification method. These methods match the issuing stock’s price with the older, most recent, or on average cost.
The cost of goods sold or each method has been computed in the previous subparts. The list of COGS under the three methods is as follows –
Weighted Average Method
Question: Antique Carpets’s books show the following data. In early 2020, auditors found that the ending merchandise inventory for 2017 was understated by $8,000 and that theending merchandise inventory for 2019 was overstated by $9,000. The ending merchandiseinventory at December 31, 2018, was correct.
Net Sales Revenue
Cost of Goods Sold:
Beginning Merchandise Inventory
Net cost of purchase
Cost of goods available for sale
Less: Ending Merchandise Inventory
Cost of goods sold
1. Prepare corrected income statements for the three years. 2. State whether each year’s net income—before your corrections—is understated oroverstated, and indicate the amount of the understatement or overstatement.
3. Compute the inventory turnover and days’ sales in inventory using the correctedincome statements for the three years. (Round all numbers to two decimals.)
Some of L and K Electronics’s merchandise is gathering dust. It is now December 31, 2018, and the current replacement cost of the ending merchandise inventory is$32,000 below the business’s cost of the goods, which was $98,000. Before any adjustmentsat the end of the period, the company’s Cost of Goods Sold account has a balanceof $410,000.
1. Journalize any required entries.
Question: This problem continues the Crystal Clear Cleaning problem begun in Chapter 2 and continued through Chapter 5.
Consider the December transactions for Crystal Clear Cleaning that were presentedin Chapter 5. (Cost data have been removed from the sale transactions.) Crystal Clearuses the perpetual inventory system.
Dec. 2 Purchased 1,000 units of inventory for $4,000 on account from Sparkle
Company on terms, 5/10, n/20.
5 Purchased 1,200 units of inventory from Borax on account with terms
4/10, n/30. The total invoice was for $6,000, which included a $300
7 Returned 300 units of inventory to Sparkle from the December 2
9 Paid Borax.
11 Sold 500 units of goods to Happy Maids for $5,500 on account with
12 Paid Sparkle.
15 Received 100 units with a sales price of $1,100 of goods back from
customer Happy Maids.
21 Received payment from Happy Maids, settling the amount due in full.
28 Sold 500 units of goods to Bridget, Inc. on account for $6,500. Terms
29 Paid cash for utilities of $550.
30 Paid cash for Sales Commission Expense of $214.
31 Received payment from Bridget, Inc., less discount.
31 Recorded the following adjusting entries:
a. Physical count of inventory on December 31 showed 800 units of
goods on hand.
b. Depreciation, $150.
c. Accrued salaries expense of $2,100.
d. Estimated sales returns of $1,500, with cost of $540.
e. Prepared all other adjustments necessary for December (Hint: You willneed to review the adjustment information in Chapter 3 to determinethe remaining adjustments). Assume the cleaning supplies left atDecember 31 are $50.
1. Prepare perpetual inventory records for December for Crystal Clear Cleaning usingthe FIFO inventory costing method. (Note: You must calculate the cost of goodssold on the 11th, 28th, and 31st (adjusting entry a).) Round per unit costs to twodecimal places.
Question: Assume that Toys Galore store bought and sold a line of dolls during December as follows:
Dec. 1 Beginning merchandise inventory 13 units @ $ 9 each
8 Sale 8 units @ $ 22 each
14 Purchase 16 units @ $ 14 each
21 Sale 14 units @ $ 22 each
3. Which method results in a higher cost of goods sold?
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