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Horngren'S Financial And Managerial Accounting
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Short Answer

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

Requirements

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.

See the step by step solution

Step by Step Solution

Step-by-Step-SolutionStep 1: Cost of goods sold

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.

Step 2: Computed Cost of goods sold under the three methods

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 –

Method

COGS

FIFO

$6,070

LIFO

$6,165

Weighted Average Method

$6,080

Most popular questions for Business-studies Textbooks

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

freight charge.

7 Returned 300 units of inventory to Sparkle from the December 2

purchase.

9 Paid Borax.

11 Sold 500 units of goods to Happy Maids for $5,500 on account with

termsn/30.

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

1/15,n/30.

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.

Requirements

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.

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