Principles of Accounting 1 Chapter 6 Homework Exercise 1 – FIFO Perpetual Lighti

Question

Principles of Accounting 1

Chapter 6 Homework

Exercise 1 – FIFO Perpetual

Lighting Designs by Laura has the following list of beginning inventory, purchases, and sales for the month of June:

1st      Beginning Inventory                        600 light bulbs at $0.20

4th      Purchase                                           400 light bulbs at $0.30

10th    Sale                                                  750 light bulbs at $1.75

13th    Purchase                                           300 light bulbs at $0.25

19th    Sale                                                  370 light bulbs at $2.00

23rd   Purchase                                           300 light bulbs at $0.35

28th    Sale                                                  160 light bulbs at $1.80

Determine the cost of merchandise sold for each sale (10th, 19th, and 28th). Calculate the cost of ending inventory using the first-in, first-out method under a perpetual inventory system.

Exercise 2 – LIFO Perpetual

Lighting Designs by Laura has the following list of beginning inventory, purchases, and sales for the month of June:

1st      Beginning Inventory                         600 light bulbs at $0.20

4th      Purchase                                           400 light bulbs at $0.30

10th      Sale                                                 750 light bulbs at $1.75

13th    Purchase                                           300 light bulbs at $0.25

19th    Sale                                                   370 light bulbs at $2.00

23rd   Purchase                                            300 light bulbs at $0.35

28th    Sale                                                   160 light bulbs at $1.80

Determine the cost of merchandise sold for each sale (10th, 19th, and 28th). Calculate the cost of ending inventory using the last-in, first-out method under a perpetual inventory system.

Exercise 3 – Periodic (FIFO, LIFO, Average)

Spring River sells bottled water using a periodic inventory system. The following is a list of beginning inventory and purchases for bottles used in manufacturing their spring water.

                        Beginning Inventory                           10,000 bottles at $0.10          

                        First Purchase                                      5,500 bottles at $0.16

                        Second Purchase                                 6,000 bottles at $0.12

                        Third Purchase                                    4,000 bottles at $0.18

At the end of the year, 4,500 bottles remained in ending inventory. What is cost of merchandise sold and ending inventory under the FIFO, LIFO and average cost methods? Present your answers in the following form (in an excel spreadsheet). Round to the nearest dollar.

                                                                                                            Cost

Inventory Method                             Merchandise Inventory                    Merchandise Sold

a. FIFO                                                   $                                                          $

b. LIFO          

c. Weighted average cost

Explanation / Answer

All Amounts in $ Exercise 1 - FIFO Perpetual 1st       Beginning Inventory                        600 light bulbs at $0.20 4th       Purchase                                           400 light bulbs at $0.30 10th     Sale                                                  750 light bulbs at $1.75 Cost of Sales 600 light bulbs @ 0.20 = $ 120 150 light bulbs @ 0.30 = $ 45 Total Cost for 10th Sale $ 165 13th     Purchase                                           300 light bulbs at $0.25 19th     Sale                                                  370 light bulbs at $2.00 Cost of Sales 250 light bulbs @ 0.30 = $ 75 Cost of 120 light bulbs @ 0.25 = $ 30 Total Cost for 19th Sale $ 105 23rd    Purchase                                           300 light bulbs at $0.35 28th     Sale                                                  160 light bulbs at $1.80 Cost of 160 light bulbs @ 0.25 = $ 40 (Total Cost for 28th Sale) Exercise 2 - LIFO Perpetual 1st       Beginning Inventory                        600 light bulbs at $0.20 4th       Purchase                                           400 light bulbs at $0.30 10th     Sale                                                  750 light bulbs at $1.75 Cost of Sales 400 light bulbs @ 0.30 = $ 120 350 light bulbs @ 0.20 = $ 70 Total Cost for 10th Sale $ 190 13th     Purchase                                           300 light bulbs at $0.25 19th     Sale                                                  370 light bulbs at $2.00 Cost of Sales 300 light bulbs @ 0.25 = $ 75 Cost of 70 light bulbs @ 0.2 = $ 14 Total Cost for 19th Sale $ 89 23rd    Purchase                                           300 light bulbs at $0.35 28th     Sale                                                  160 light bulbs at $1.80 Cost of 160 light bulbs @ 0.35 = $ 56 (Total Cost for 28th Sale) Exercise 3 - FIFO, LIFO, Periodic Average Spring River sells bottled water using a periodic inventory system. The following is a list of beginning inventory and purchases for bottles used in manufacturing their spring water.                         Beginning Inventory                           10,000 bottles at $0.10           1000                         First Purchase                                      5,500 bottles at $0.16 880                         Second Purchase                                 6,000 bottles at $0.12 720                         Third Purchase                                    4,000 bottles at $0.18 720                                                                                                             Cost Inventory Method                             Merchandise Inventory                    Merchandise Sold a. FIFO                                                    500 bottles @ 0.12 + 4,000 bottles @ 0.18 10,000 bottles @ 0.10 + 5,500 bottles @ 0.16 + 5,500 bottles @ 0.12 = 60 + 720 = $ 780 = 1,000 + 880 + 660 = $ 2,540 b. LIFO           4,500 bottles @ 0.10 = $ 450 4,000 bottles @ 0.18 + 6,000 bottles @ 0.12 + 5,500 bottles @ 0.16 + 5,500 bottles @ 0.10 = 720 + 720 + 880 + 550 = $ 2,870 c. Weighted average cost 4,500 bottles @ 0.13 = 21,000 bottles @ 0.13 ($ 3,320 total cost divided by 25,500 bottles used) $ 585 = $ 2,730

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