Question

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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

70

units

@ $50.40 per unit

Mar.

5

Purchase

210

units

@ $55.40 per unit

Mar.

9

Sales

230

units

@ $85.40 per unit

Mar.

18

Purchase

70

units

@ $60.40 per unit

Mar.

25

Purchase

120

units

@ $62.40 per unit

Mar.

29

Sales

100

units

@ $95.40 per unit

Totals

470

units

330

units

Problem 5-2AA Part 3

1. 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 50 units from beginning inventory and 180 units from the March 5 purchase; the March 29 sale consisted of 30 units from the March 18 purchase and 70 units from the March 25 purchase.

2. Compute gross profit earned by the company for each of the four costing methods. For specific identification, the March 9 sale consisted of 50 units from beginning inventory and 180 units from the March 5 purchase; the March 29 sale consisted of 30 units from the March 18 purchase and 70 units from the March 25 purchase.

Answer 1

Warnerwoods Company uses a perpetual inventory system. It entered into the following purchases and sales transactions for March.

		Purchase			Sale			Ending Inventory
Date		Units	Rate	Cost	Units	Rate	Cost	Units	Rate	Cost
Beginning								70	$    50.40	$    3,528
Mar 5		210	$    55.40	$ 11,634				70	$    50.40	$    3,528
								210	$    55.40	$ 11,634
Mar 9					50	$                          50.40	$    2,520	20	$    50.40	$    1,008
					180	$                          55.40	$    9,972	30	$    55.40	$    1,662
Mar 18		70	$    60.40	$    4,228				20	$    50.40	$    1,008
								30	$    55.40	$    1,662
								70	$    60.40	$    4,228
Mar 25		120	$    62.40	$    7,488				20	$    50.40	$    1,008
								30	$    55.40	$    1,662
								70	$    60.40	$    4,228
								120	$    62.40	$    7,488
Mar 29					30	$                          60.40	$    1,812	20	$    50.40	$    1,008
					70	$                          62.40	$    4,368	30	$    55.40	$    1,662
								40	$    60.40	$    2,416
								50	$    62.40	$    3,120
Total							$ 18,672			$    8,206