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Questions 11-14
[The following information applies to the questions displayed below.]
Warnerwoods Company uses a perpetual 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 | | 100 | units | @ $50.00 per unit | | | | |
| Mar. | 5 | | Purchase | | 400 | units | @ $55.00 per unit | | | | |
| Mar. | 9 | | Sales | | | | | | 420 | units | @ $85.00 per unit |
| Mar. | 18 | | Purchase | | 120 | units | @ $60.00 per unit | | | | |
| Mar. | 25 | | Purchase | | 200 | units | @ $62.00 per unit | | | | |
| Mar. | 29 | | Sales | | | | | | 160 | units | @ $95.00 per unit |
| | | | | |
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| | |
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| |
| | | | Totals | | 820 | units | | | 580 | units |
11.
| Required: |
| 1. | Compute cost of goods available for sale and the number of units available for sale. |
|
|
| Cost of Goods Available for Sale |
| # of units | Cost per Unit | Cost of Goods Available for Sale |
| Beginning inventory | 100 | $50.00 | $5,000 |
| Purchases: | | | |
| March 5 | 400 | 55.00 | 22,000 |
| March 18 | 120 | 60.00 | 7,200 |
| March 25 | 200 | 62.00 | 12,400 |
| Total | 820 | | $46,600 |
|
12.
| 2. | Compute the number of units in ending inventory. |
13.
| 3. |
Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d)specific identification. 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. (Round your average cost per unit to 2 decimal places.)
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|
|
| Perpetual FIFO: |
| Goods Purchased | Cost of Goods Sold | Inventory Balance |
| Date | # of units | | Cost per unit | # of units sold | Cost per unit | Cost of Goods Sold | # of units | Cost per unit | Inventory Balance |
| March 1 | | | | | | | | | 100 | @ | $50.00 | = | $5,000.00 |
|
| March 5 | 400 | @ | $55.00 | | | | | | 100 | @ | $50.00 | = | $5,000.00 |
| | | | | | | | | 400 | @ | $55.00 | = | 22,000.00 |
| | | | | | | | | | | | | $27,000.00 |
|
| March 9 | | | | 100 | @ | $50.00 | = | $5,000.00 | | @ | $50.00 | = | |
| | | | 320 | @ | $55.00 | = | 17,600.00 | 80 | @ | $55.00 | = | $4,400.00 |
| | | | | | | | $22,600.00 | | | | | $4,400.00 |
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| March 18 | 120 | @ | $60.00 | | | | | | | @ | $50.00 | | |
| | | | | | | | | 80 | @ | $55.00 | = | 4,400.00 |
| | | | | | | | | 120 | @ | $60.00 | = | 7,200.00 |
| | | | | | | | | | | | | $11,600.00 |
|
| March 25 | 200 | @ | $62.00 | | | | | | | @ | $50.00 | | |
| | | | | | | | | 80 | @ | $55.00 | = | 4,400.00 |
| | | | | | | | | 120 | @ | $60.00 | = | 7,200.00 |
| | | | | | | | | 200 | @ | $62.00 | | 12,400.00 |
| | | | | | | | | | | | | $24,000.00 |
|
| March 29 | | | | | @ | $50.00 | = | $0.00 | | @ | $50.00 | | |
| | | | 80 | @ | $55.00 | = | 4,400.00 | | @ | $55.00 | | |
| | | | 80 | @ | $60.00 | = | 4,800.00 | 40 | @ | $60.00 | = | 2,400.00 |
| | | | | @ | $62.00 | = | 0.00 | 200 | @ | $62.00 | = | 12,400.00 |
| | | | | | | | $9,200.00 | | | | | $14,800.00 |
| Totals | | | | | | | | $31,800.00 | | | | | $14,800.00 |
|
=============
|
|
| Perpetual LIFO: |
| Goods Purchased | Cost of Goods Sold | Inventory Balance |
| Date | # of units | | Cost per unit | # of units sold | Cost per unit | Cost of Goods Sold | # of units | Cost per unit | Inventory Balance |
| March 1 | | | | | | | | | 100 | @ | $50.00 | = | $5,000.00 |
|
| March 5 | 400 | @ | $55.00 | | | | | | 100 | @ | $50.00 | = | $5,000.00 |
| | | | | | | | | 400 | @ | $55.00 | = | 22,000.00 |
| | | | | | | | | | | | | $27,000.00 |
|
| March 9 | | | | 20 | @ | $50.00 | = | $1,000.00 | 80 | @ | $50.00 | = | $4,000.00 |
| | | | 400 | @ | $55.00 | = | 22,000.00 | | @ | $55.00 | = | |
| | | | | | | | $23,000.00 | | | | | $4,000.00 |
|
| March 18 | 120 | @ | $60.00 | | | | | | 80 | @ | $50.00 | = | $4,000.00 |
| | | | | | | | | | @ | $55.00 | | |
| | | | | | | | | 120 | @ | $60.00 | = | 7,200.00 |
| | | | | | | | | | | | | $11,200.00 |
|
| March 25 | 200 | @ | $62.00 | | | | | | 80 | @ | $50.00 | = | $4,000.00 |
| | | | | | | | | 0 | @ | $55.00 | | |
| | | | | | | | | 120 | @ | $60.00 | = | 7,200.00 |
| | | | | | | | | 200 | @ | $62.00 | | 12,400.00 |
| | | | | | | | | | | | | $23,600.00 |
|
| March 29 | | | | | @ | $50.00 | = | $0.00 | 80 | @ | $50.00 | = | $4,000.00 |
| | | | 0 | @ | $55.00 | = | 0.00 | | @ | $55.00 | | |
| | | | 0 | @ | $60.00 | = | 0.00 | 120 | @ | $60.00 | = | 7,200.00 |
| | | | 160 | @ | $62.00 | = | 9,920.00 | 40 | @ | $62.00 | = | 2,480.00 |
| | | | | | | | $9,920.00 | | | | | $13,680.00 |
| Totals | | | | | | | | $32,920.00 | | | | | $13,680.00 |
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============================
| Weighted Average Perpetual: |
| Goods Purchased | Cost of Goods Sold | Inventory Balance |
| Date | # of units | | Cost per unit | # of units sold | Cost per unit | Cost of Goods Sold | # of units | Cost per unit | Inventory Balance |
| March 1 | | | | | | | | | 100 | @ | $50.00 | = | $5,000.00 |
|
| March 5 | 400 | @ | $55.00 | | | | | | 100 | @ | $50.00 | = | $5,000.00 |
| | | | | | | | | 400 | @ | $55.00 | = | 22,000.00 |
| Average | | | | | | | | | 500 | @ | $54.00 | = | $27,000.00 |
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| March 9 | | | | 420 | @ | $54.00 | = | $22,680.00 | 80 | @ | $54.00 | = | $4,320.00 |
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| March 18 | 120 | @ | $60.00 | | | | | | 80 | @ | $54.00 | = | $4,320.00 |
| | | | | | | | | 120 | @ | $60.00 | = | 7,200.00 |
| Average | | | | | | | | | 200 | @ | $57.60 | = | $11,520.00 |
|
| March 25 | 200 | @ | $62.00 | | | | | | 80 | @ | $54.00 | = | $4,320.00 |
| | | | | | | | | 120 | @ | $60.00 | | 7,200.00 |
| | | | | | | | | 200 | @ | $62.00 | = | 12,400.00 |
| | | | | | | | | 400 | @ | $59.80 | = | $23,920.00 |
|
| March 29 | | | | 160 | @ | $59.80 | = | $9,568.00 | 240 | @ | $59.80 | = | $14,352.00 |
| Totals | | | | | | | | $32,248.00 | | | | |
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==================
|
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| Specific Identification: |
| Goods Purchased | Cost of Goods Sold | Inventory Balance |
| Date | # of units | | Cost per unit | # of units sold | Cost per unit | Cost of Goods Sold | # of units | Cost per unit | Inventory Balance |
| March 1 | | | | | | | | | 100 | @ | $50.00 | = | $5,000.00 |
|
| March 5 | 400 | @ | $55.00 | | | | | | 100 | @ | $50.00 | = | $5,000.00 |
| | | | | | | | | 400 | @ | $55.00 | = | 22,000.00 |
| | | | | | | | | | | | | $27,000.00 |
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| March 9 | | | | 80 | @ | $50.00 | = | $4,000.00 | 20 | @ | $50.00 | = | $1,000.00 |
| | | | 340 | @ | $55.00 | = | 18,700.00 | 60 | @ | $55.00 | = | $3,300.00 |
| | | | | | | | $22,700.00 | | | | | $4,300.00 |
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| March 18 | 120 | @ | $60.00 | | | | | | 20 | @ | $50.00 | = | $1,000.00 |
| | | | | | | | | 60 | @ | $55.00 | = | 3,300.00 |
| | | | | | | | | 120 | @ | $60.00 | = | 7,200.00 |
| | | | | | | | | | | | | $11,500.00 |
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| March 25 | 200 | @ | $62.00 | | | | | | 20 | @ | $50.00 | = | $1,000.00 |
| | | | | | | | | 60 | @ | $55.00 | = | 3,300.00 |
| | | | | | | | | 120 | @ | $60.00 | = | 7,200.00 |
| | | | | | | | | 200 | @ | $62.00 | | 12,400.00 |
| | | | | | | | | | | | | $23,900.00 |
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| March 29 | | | | | @ | $50.00 | = | $0.00 | 20 | @ | $50.00 | = | $1,000.00 |
| | | | 0 | @ | $55.00 | = | 0.00 | 60 | @ | $55.00 | = | 3,300.00 |
| | | | 40 | @ | $60.00 | = | 2,400.00 | 80 | @ | $60.00 | = | 4,800.00 |
| | | | 120 | @ | $62.00 | = | 7,440.00 | 80 | @ | $62.00 | = | 4,960.00 |
| | | | | | | | $9,840.00 | | | | | $14,060.00 |
| Totals | | | | | | | | $32,540.00 | | | | | $14,060.00 |
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14.
| 4. |
Compute gross profit earned by the company for each of the four costing methods. 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. (Round weighted average cost per unit to two decimals.)
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|
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| FIFO | LIFO | Weighted Average | Specific Identification |
| Sales | $50,900 . | $50,900 | $50,900 | $50,900 |
| Less: Cost of goods sold | $31,800 . | 32,920 . | 32,248 . | 32,540 . |
| Gross profit | $19,100 . | $17,980 . | $18,652 . | $18,360 . |
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15.
A physical inventory of Liverpool Company taken at December 31 reveals the following.
| | Per Unit |
| |
|
| Item | Units | Cost | Market |
| Audio equipment | | | | | |
| Receivers | 345 | $ | 90 | $ | 98 |
| CD players | 260 | | 111 | | 100 |
| MP3 players | 326 | | 86 | | 95 |
| Speakers | 204 | | 52 | | 41 |
| Video equipment | | | | | |
| Handheld LCDs | 480 | | 150 | | 125 |
| VCRs | 291 | | 93 | | 84 |
| Camcorders | 212 | | 310 | | 322 |
| Car audio equipment | | | | | |
| Satellite radios | 185 | | 70 | | 84 |
| CD/MP3 radios | 170 | | 97 | | 105 |
| Required: |
| 1. |
Calculate the lower of cost or market for the inventory applied separately to each item.
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| | Per Unit | Total | LCM applied to: |
| Item | Units | Cost | Market | Cost | Market | Entire Inventory | Individual Items |
| Audio equipment | | | | | | | |
| Receivers | 345 | 90.00 | 98.00 | 31,050 | 33,810 | | 31,050 |
| CD players | 260 | 111.00 | 100.00 | 28,860 | 26,000 | | 26,000 |
| MP3 players | 326 | 86.00 | 95.00 | 28,036 | 30,970 | | 28,036 |
| Speakers | 204 | 52.00 | 41.00 | 10,608 | 8,364 | | 8,364 |
| Video equipment | | | | | | | |
| Handheld LCDs | 480 | 150.00 | 125.00 | 72,000 | 60,000 | | 60,000 |
| VCRs | 291 | 93.00 | 84.00 | 27,063 | 24,444 | | 24,444 |
| Camcorders | 212 | 310.00 | 322.00 | 65,720 | 68,264 | | 65,720 |
| Car audio equipment | | | | | | | |
| Satellite radios | 185 | 70.00 | 84.00 | 12,950 | 15,540 | | 12,950 |
| CD/MP3 radios | 170 | 97.00 | 105.00 | 16,490 | 17,850 | | 16,490 |
| Total | | | | $292,777 | $285,242 | $285,242 | $273,054 |
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| 2. |
If the market amount is less than the recorded cost of the inventory, then record the LCM adjustment to the Merchandise Inventory account.
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| Date | General Journal | Debit | Credit |
| Dec 31 | Cost of goods sold | 19,723 | |
| Merchandise inventory | | 19,723 |
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16.
Navajo Company’s financial statements show the following. The company recently discovered that in making physical counts of inventory, it had made the following errors: Inventory on December 31, 2014, is understated by $56,000, and inventory on December 31, 2015, is overstated by $20,000.
| For Year Ended December 31 | 2014 | 2015 | 2016 |
| (a) | Cost of goods sold | $ | 615,000 | $ | 957,000 | $ | 780,000 |
| (b) | Net income | | 230,000 | | 285,000 | | 241,000 |
| (c) | Total current assets | | 1,255,000 | | 1,365,000 | | 1,200,000 |
| (d) | Total equity | | 1,387,000 | | 1,530,000 | | 1,242,000 |
| Required: |
| 1. |
For each key financial statement figure—(a), (b), (c), and (d) below—prepare a table to show the adjustments necessary to correct the reported amounts. (Amounts to be deducted must be entered with a minus sign.)
|
|
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| Cost of goods sold: | | 2014 | 2015 | 2016 |
| Reported amount | | $615,000 | $957,000 | $780,000 |
| Adjustments for: | 12/31/2014 error | (56,000) | 56,000 | |
| 12/31/2015 error | | 20,000 | (20,000) |
| Corrected amount | | $559,000 | $1,033,000 | $760,000 |
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|
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| Net income | | 2014 | 2015 | 2016 |
| Reported amount | | $230,000 | $285,000 | $241,000 |
| Adjustments for: | 12/31/2014 error | 56,000 | (56,000) | |
| 12/31/2015 error | | (20,000) | 20,000 |
| Corrected amount | | $286,000 | $209,000 | $261,000 |
|
|
|
| Total current assets | | 2014 | 2015 | 2016 |
| Reported amount | | $1,255,000 | $1,365,000 | $1,200,000 |
| Adjustments for: | 12/31/2014 error | 56,000 | | |
| 12/31/2015 error | | (20,000) | |
| Corrected amount | | $1,311,000 | $1,345,000 | $1,200,000 |
|
|
|
| Equity | | 2014 | 2015 | 2016 |
| Reported amount | | $1,387,000 | $1,530,000 | $1,242,000 |
| Adjustments for: | 12/31/2014 error | 56,000 | | |
| 12/31/2015 error | | (20,000) | |
| Corrected amount | | $1,443,000 | $1,510,000 | $1,242,000 |
|
| 2. |
What is the error in total net income for the combined three-year period resulting from the inventory errors?
|
|
|
| Error in total net income of three years | $0 |
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17.
Montoure Company uses a perpetual inventory system. It entered into the following calendar-year 2015 purchases and sales transactions.
| Date | Activities | Units Acquired at Cost | Units Sold at Retail |
| Jan. | 1 | | Beginning inventory | | 600 | units | @ $45 per unit | | | | |
| Feb. | 10 | | Purchase | | 400 | units | @ $42 per unit | | | | |
| Mar. | 13 | | Purchase | | 200 | units | @ $27 per unit | | | | |
| Mar. | 15 | | Sales | | | | | | 800 | units | @ $75 per unit |
| Aug. | 21 | | Purchase | | 100 | units | @ $50 per unit | | | | |
| Sept. | 5 | | Purchase | | 500 | units | @ $46 per unit | | | | |
| Sept. | 10 | | Sales | | | | | | 600 | units | @ $75 per unit |
| | | | | |
|
| | |
|
| |
| | | | Totals | | 1,800 | units | | | 1,400 | units |
| Required: |
1.
|
Compute cost of goods available for sale and the number of units available for sale.
|
|
|
|
| Cost of goods available for sale | $77,200 | |
| Number of units available for sale | 1,800 | units |
|
| 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. 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. (Round your average cost per unit to 2 decimal places.)
|
|
|
| | Ending Inventory |
| (a) | FIFO | $18,400 |
| (b) | LIFO | $18,000 |
| (c) | Weighted average | $17,760 |
| (d) | Specific identification | $18,200 |
|
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.)
|
|
|
| FIFO | LIFO | Weighted Average | Specific Identification |
| Sales | $105,000 | $105,000 | $105,000 | $105,000 |
| Less: Cost of goods sold | 58,800 | 59,200 | 59,440 | 59,000 |
| Gross profit | $46,200 | $45,800 | $45,560 | $46,000
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