The beginning inventory for Dunne Co. and data on purchases and sales for a thre

Question

The beginning inventory for Dunne Co. and data on purchases and sales for a three-month period are shown below

Date

FIFO

1. Determine the inventory on June 30, 2016, and the cost of goods sold for the three-month period, using the first-in, first-out method and the periodic inventory system.

LIFO

2. Determine the inventory on June 30, 2016, and the cost of goods sold for the three-month period, using the last-in, first-out method and the periodic inventory system.

Weighted Average Cost Method

3. Determine the inventory on June 30, 2016, and the cost of goods sold for the three-month period, using the weighted average cost method and the periodic inventory system. Round the weighted average unit cost to the dollar.

Final Question

4. Compare the gross profit and June 30, 2016, inventories using the following column headings:

1

FIFO

LIFO

Weighted Average

2

Sales

3

Cost of merchandise sold

4

Gross profit

5

6

Inventory, June 30, 2016

Date

Transaction Number of Units Per Unit Total Apr. 3 Inventory 25 $1,200 $30,000 8 Purchase 75 1,240 93,000 11 Sale 40 2,000 80,000 30 Sale 30 2,000 60,000 May 8 Purchase 60 1,260 75,600 10 Sale 50 2,000 100,000 19 Sale 20 2,000 40,000 28 Purchase 80 1,260 100,800 June 5 Sale 40 2,250 90,000 16 Sale 25 2,250 56,250 21 Purchase 35 1,264 44,240 28 Sale 44 2,250 99,000

Explanation / Answer

(1) First-in-First-out Method

Inventory as on June 30 : 26 units @ $ 1,264 per unit = $ 32,864

Cost of Goods Sold = 30,000 + 18,600 + 37,200 + 37,200 + 25,200 + 25,200 + 50,400 + 31,500 + 44,100 + 11,376

                             = $ 310,776

(2) Last-in-First-out Method

Inventory as on June 30 : 6 units @ $ 1,260 per unit = $ 7,560

                                   20 units @ $ 1,200 per unit = $ 24,000

Cost of Goods Sold = 49,600 + 37,200 + 63,000 + 12,600 + 6,200 + 6,000 + 50,400 + 31,500 + 44,240 + 11,340

                             = $ 312,080

(3) Weighted Average Method

Weighted Average Rate per unit of Inventory = ((25 units x $ 1,200) + (75 units x $ 1,240) + (60 units x $ 1,260) + (80 units x $ 1,260) + (35 units x $ 1,264)) / (25 + 75 + 60 + 80 + 35)

                                                                = $ 343,640 / 275 units

                                                                = $ 1,249.60 per unit or $ 1,250 per unit

Inventory as on June 30 : 26 units @ $ 1,250 per unit = $ 32,500

Cost of Goods Sold = 249 units x $ 1,250 per unit

                             = $ 311,250

(4) Comparison

                            

Date Particulars Quantity Rate ($) Amount ($) Total ($) April 3 Opening Stock 25 1,200 30,000 30,000 April 8 Purchases 75 1,240 93,000 123,000 April 11 Sales 25 1,200 30,000 93,000 April 11 Sales 15 1,240 18,600 74,400 April 30 Sales 30 1,240 37,200 37,200 May 8 Purchase 60 1,260 75,600 112,800 May 10 Sales 30 1,240 37,200 75,600 May 10 Sales 20 1,260 25,200 50,400 May 19 Sales 20 1,260 25,200 25,200 May 28 Purchases 80 1,260 100,800 126,000 June 5 Sales 40 1,260 50,400 75,600 June 16 Sales 25 1,260 31,500 44,100 June 21 Purchases 35 1,264 44,240 88,340 June 28 Sales 35 1,260 44,100 44,240 June 28 Sales 9 1,264 11,376 32,864 June 30 Closing Stock 26 1,264 32,864 32,864

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