P6-5A You are provided with the following information for Pavey Inc. for the mon
ID: 2336083 • Letter: P
Question
P6-5A You are provided with the following information for Pavey Inc. for the month ended October 31, 2010. Pavey uses a periodic method for inventory. Unit Cost or Selling Price $25 26 35 27 40 28 40 Date October 1 October 9 October 11 October 17 October 22 October 25 October 29 Description Beginning inventory Purchase Sale Purchase Sale Purchase Sale Units 60 120 100 70 60 80 110 Instructions (a) Calculate (i) ending inventory, (ii) cost of goods sold, (ii) gross profit, and (iv) gross profit rate under each of the following methods. (1) LIFO (2) FIFO. (3) Average-cost (b) Compare results for the three cost flow assumptions.Explanation / Answer
Answers
Sales
Units
Rate
Amount
Oct-11
100
$ 35.00
$ 3,500.00
Oct-22
60
$ 40.00
$ 2,400.00
Oct-29
110
$ 40.00
$ 4,400.00
$ -
$ -
Total
270
$ 10,300.00
---FIFO
FIFO
Cost of Goods available for sale
Cost of Goods Sold
Ending Inventory
Units
Cost/unit
COG for sale
Units sold
Cost/unit
COGS
Units
Cost/unit
Ending inventory
Beginning Inventory
60
$ 25.00
$ 1,500.00
60
$ 25.00
$ 1,500.00
0
$ 25.00
$ -
Purchases:
09-Oct
120
$ 26.00
$ 3,120.00
120
$ 26.00
$ 3,120.00
0
$ 26.00
$ -
17-Oct
70
$ 27.00
$ 1,890.00
70
$ 27.00
$ 1,890.00
0
$ 27.00
$ -
25-Oct
80
$ 28.00
$ 2,240.00
20
$ 28.00
$ 560.00
60
$ 28.00
$ 1,680.00
$ -
$ -
$ -
0
$ -
$ -
TOTAL
330
$ 8,750.00
270
$ 7,070.00
60
$ 1,680.00
Sales
Units
Rate
Amount
Oct-11
100
$ 35.00
$ 3,500.00
Oct-22
60
$ 40.00
$ 2,400.00
Oct-29
110
$ 40.00
$ 4,400.00
$ -
$ -
Total
270
$ 10,300.00
(-) CoGS
270
$ 7,070.00
Gross Profit
$ 3,230.00
---LIFO
LIFO
Cost of Goods available for sale
Cost of Goods Sold
Ending Inventory
Units
Cost/unit
COG for sale
Units sold
Cost/unit
COGS
Units
Cost/unit
Ending inventory
Beginning Inventory
60
$ 25.00
$ 1,500.00
0
$ 25.00
$ -
60
$ 25.00
$ 1,500.00
Purchases:
0
$ -
$ -
09-Oct
120
$ 26.00
$ 3,120.00
120
$ 26.00
$ 3,120.00
0
$ 26.00
$ -
17-Oct
70
$ 27.00
$ 1,890.00
70
$ 27.00
$ 1,890.00
0
$ 27.00
$ -
25-Oct
80
$ 28.00
$ 2,240.00
80
$ 28.00
$ 2,240.00
0
$ 28.00
$ -
00-Jan
0
$ -
$ -
0
$ -
$ -
0
$ -
$ -
TOTAL
330
$ 8,750.00
270
$ 7,250.00
60
$ 1,500.00
Sales
Units
Rate
Amount
Oct-11
100
$ 35.00
$ 3,500.00
Oct-22
60
$ 40.00
$ 2,400.00
Oct-29
110
$ 40.00
$ 4,400.00
Total
270
$ 10,300.00
(-) CoGS
270
$ 7,250.00
Gross Profit
$ 3,050.00
---Average Method
Average Method
Cost of Goods available for sale
Cost of Goods Sold
Ending Inventory
Units
Cost/unit
COG for sale
Units sold
Cost/unit
COGS
Units
Cost/unit
Ending inventory
Beginning Inventory
60
$ 25.00
$ 1,500.00
Purchases:
0
$ -
$ -
09-Oct
120
$ 26.00
$ 3,120.00
17-Oct
70
$ 27.00
$ 1,890.00
25-Oct
80
$ 28.00
$ 2,240.00
00-Jan
0
$ -
$ -
TOTAL
330
$ 26.52
$ 8,750.00
270
$ 26.52
$ 7,159.09
60
$ 26.52
$ 1,590.91
Sales
Units
Rate
Amount
Oct-11
100
$ 35.00
$ 3,500.00
Oct-22
60
$ 40.00
$ 2,400.00
Oct-29
110
$ 40.00
$ 4,400.00
Total
270
$ 10,300.00
(-) CoGS
270
$ 7,159.09
Gross Profit
$ 3,140.91
--Comparison of Cost of Goods Sold, Gross Profits and Inventory Value
FIFO
LIFO
Weighted Average Method
Sales Revenue
$ 10,300.00
$ 10,300.00
$ 10,300.00
(-) Cost of Goods Sold (as calculated above)
$ 7,070.00
$ 7,250.00
$ 7,159.09
Gross Margin
$ 3,230.00
$ 3,050.00
$ 3,140.91
Inventory, June 30
$ 1,680.00
$ 1,500.00
$ 1,590.91
Sales
Units
Rate
Amount
Oct-11
100
$ 35.00
$ 3,500.00
Oct-22
60
$ 40.00
$ 2,400.00
Oct-29
110
$ 40.00
$ 4,400.00
$ -
$ -
Total
270
$ 10,300.00
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