Problem 6-2AA Periodic: Alternative cost flows LO P3 [The following information
ID: 2402019 • Letter: P
Question
Problem 6-2AA Periodic: Alternative cost flows LO P3
[The following information applies to the questions displayed below.]
Warnerwoods Company uses a periodic inventory system. It entered into the following purchases and sales transactions for March.
Date
Activities
Units Acquired at Cost
Units Sold at Retail
Mar.
1
Beginning inventory
190
units
@ $80 per unit
Mar.
5
Purchase
490
units
@ $85 per unit
Mar.
9
Sales
510
units
@ $115 per unit
Mar.
18
Purchase
300
units
@ $90 per unit
Mar.
25
Purchase
380
units
@ $92 per unit
Mar.
29
Sales
340
units
@ $125 per unit
Totals
1,360
units
850
units
For specific identification, the March 9 sale consisted of 50 units from beginning inventory and 460 units from the March 5 purchase; the March 29 sale consisted of 130 units from the March 18 purchase and 210 units from the March 25 purchase.
Required.
1. Compute cost of goods available for sale and the number of units available for sale.
2. Compute the number of units in ending inventory.
3. Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification. (Round your average cost per unit to 2 decimal places.)
4. Compute gross profit earned by the company for each of the four costing methods. (Round your average cost per unit to 2 decimal places and final answers to nearest whole dollar.)
Date
Activities
Units Acquired at Cost
Units Sold at Retail
Mar.
1
Beginning inventory
190
units
@ $80 per unit
Mar.
5
Purchase
490
units
@ $85 per unit
Mar.
9
Sales
510
units
@ $115 per unit
Mar.
18
Purchase
300
units
@ $90 per unit
Mar.
25
Purchase
380
units
@ $92 per unit
Mar.
29
Sales
340
units
@ $125 per unit
Totals
1,360
units
850
units
Explanation / Answer
1. Cost Goods available for sales= Opening stock + Purchases
=15200+103610=118810
Number units available for sale= Opening+Purchases
= 1170+190=1360
2. Closing inventory = 510 ( See the table)
3. Cost of the inventory
a) FIFO
380 x 92 =34960
(510-380)x 90=11700
=46660
b) LIFO
190 x 80 = 15200
(510-190) x 85=27200
=42400
c) Weighted average method
Average cost of Goods available for sale = 118810/1360=87.36
Inventory value = 87.36x510=44553.75
d) Specific identification
4.GROSS PROFIT
Date Tran. opening Cost/unit Purchase Cost/unit Value Total Sales value/unit Value Balance Mar-1 Opening 190 80 0 0 15200 190 0 0 0 190 Mar-5 Purchase 190 490 85 41650 680 0 0 0 680 Mar-9 Sales 680 680 510 115 58650 170 Mar-18 Purchase 170 300 90 27000 470 0 0 0 470 Mar-25 Purchase 470 380 92 34960 850 0 0 0 850 Mar-29 Sales 850 0 850 340 125 42500 510 1170 118810 850 101150