Problem 5-3A Perpetual: Alternative cost flows P9 Montoure Company uses a perpet
ID: 2412303 • Letter: P
Question
Problem 5-3A Perpetual: Alternative cost flows P9 Montoure Company uses a perpetual inventory system. It entered into the following calendar-year purchases and sales transactions (For specific identification, units sold consist of 600 units from beginning inventory, 300 from the February 10 purchase, 200 from the March 13 purchase, 50 from the August 21 purchase, and 250 from the September 5 purchase.) Units Sold at Retail Date Jan. 1 Beginning inventory 600 units$45.00 per unit Feb. 10 Purchase Mar. 13 Purchase Mar. 15Sales Aug. 21 Purchase Sep. 5 Purchase Sep. 10 Sales Units Acquired at Cost 400 units $42.00 per unit 200 units @ $27.00 per unit 800 units $75.00 per unit 100 units @ $50.00 per unit 500 units @ $46.00 per unit 600 units $75.00 per unit 1,400 units Totals 1,800 units 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 all amounts to cents.) Check (3) Ending inventory FIFO, $18,400; LIFO, $18,000; WA, $17360 4. Compute gross profit earned by the company for each of the four costing methods in part 3. (4) LIFO gross profit, $45,800Explanation / Answer
1) DATE Quantity Unit cost Total Cost Beginning Inventory 600 45.00 27000.00 Purchases Feb-10 400 42.00 16800.00 Mar-13 200 27.00 5400.00 Aug-21 100 50.00 5000.00 Sep-05 500 46.00 23000.00 1800 77200.00 Cost of goods available for sale = $77200 Number of units available for sale = 1800 2) Number of units in ending inventory = Number of units available for sale-Units sold = 1800 -(800+600) = 400 3) FIFO: PURCHASES COST OF GOODS SOLD INVENTORY ON HAND a) DATE Quantity Unit cost Total Cost Quantity Unit cost Total Cost Quantity Unit cost Total Cost Beginning Inventory 600 45.00 27000.00 Feb-10 400 42.00 16800.00 600 45.00 27000.00 400 42.00 16800.00 Mar-13 200 27.00 5400.00 600 45.00 27000.00 400 42.00 16800.00 200 27.00 5400.00 Mar-15 600 45.00 27000.00 200 42.00 8400.00 200 42.00 8400.00 200 27.00 5400.00 Aug-21 100 50.00 5000.00 200 42.00 8400.00 200 27.00 5400.00 100 50.00 5000.00 Sep-05 500 46.00 23000.00 200 42.00 8400.00 200 27.00 5400.00 100 50.00 5000.00 500 46.00 23000.00 Sep-10 200 42.00 8400.00 400 46.00 18400.00 200 27.00 5400.00 100 50.00 5000.00 100 46.00 4600.00 TOTALS 1200 50200.00 1400 58800.00 400 46.00 18400.00 18400.00 b) LIFO: PURCHASES COST OF GOODS SOLD INVENTORY ON HAND DATE Quantity Unit cost Total Cost Quantity Unit cost Total Cost Quantity Unit cost Total Cost Beginning Inventory 600 45.00 27000.00 Feb-10 400 42.00 16800.00 600 45.00 27000.00 400 42.00 16800.00 Mar-13 200 27.00 5400.00 600 45.00 27000.00 400 42.00 16800.00 200 27.00 5400.00 Mar-15 200 27.00 5400.00 400 42.00 16800.00 200 45.00 9000.00 400 45.00 18000.00 Aug-21 100 50.00 5000.00 400 45.00 18000.00 100 50.00 5000.00 Sep-05 500 46.00 23000.00 400 45.00 18000.00 100 50.00 5000.00 500 46.00 23000.00 Sep-10 500 46.00 23000.00 100 50.00 5000.00 400 45.00 18000.00 TOTALS 1200 50200.00 1400 59200.00 400 46.00 18000.00 18000.00 c) AVERAGE: PURCHASES COST OF GOODS SOLD INVENTORY ON HAND DATE Quantity Unit cost Total Cost Quantity Unit cost Total Cost Quantity Unit cost Total Cost Beginning Inventory 600 45.00 27000.00 Feb-10 400 42.00 16800.00 1000 43.80 43800.00 Mar-13 200 27.00 5400.00 1200 41.00 49200.00 Mar-15 800 41.00 32800.00 400 41.00 16400.00 Aug-21 100 50.00 5000.00 500 42.80 21400.00 Sep-05 500 46.00 23000.00 1000 44.40 44400.00 Sep-10 600 44.40 26640.00 400 44.40 17760.00 TOTALS 1200 50200.00 1400 59440.00 400 46.00 17760.00 d) SPECIFIC IDENTIFICATION: 17760.00 Ending inventory = 100*42+50*50+250*46 = 18200 COGS = 600*45+300*42+200*27+50*50+250*46 = 59000 77200 e) Gross profit: Method Sales COGS Gross Profit FIFO 105000 58800 46200 LIFO 105000 59200 45800 WT AV 105000 59440 45560 SPECIFIC IDENTIFICATION: 105000 59000 46000