velue: 2.00 points CP7-1 Analyzing the Effects of Four Alternative Inventory Cos
ID: 2550222 • Letter: V
Question
velue: 2.00 points CP7-1 Analyzing the Effects of Four Alternative Inventory Costing Methods [LO 7-3] Scrappers Supplies tracks the number of units purchased and sold throughout e system. Assume its acoounting records provided the following information at the end of the annual each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory accounting period, December 31 Units Unit Cost 190 $33 Beginning inventory, January 1 Transactions during the year a. Purchase on account, March 2 b. Cash sale, April 1 ($49 each) c. Purchase on account, June 30 d. Cash sale, August 1 ($49 each) 295 35 (340) 240 39 (95) TIP: Although the purchases and sales are listed in chronological order, Scrappers determines the cost of goods sold after all of the purchases have occurred Required: 1. Compute the cost of goods available for sale, cost of ending inventory, and cost of goods sold at December 31 under each of the following inventory costing methods: (Round "Cost per Unit" to 2 decimal places.) a. Last-in, first-out Cost perTotal Unit Beginning inventory Purchases March 2 June 30 Total Purchases Goods Available for Sale Cost of Goods Sold Units from Beginning Inventory Units from March 2 Purchase Units from June 30 Purchase Total Cost of Goods Sold Ending inventoryExplanation / Answer
(a). LIFO (Periodic);
LIFO (Periodic)
Units
Cost per unit
Total
Beginning inventory
190
$33
$6270
Purchases;
March 2
295
$35
$10325
June 30
240
$39
$9360
Total purchases
535
$19685
Goods available for sale
725
$25955
Cost of goods sold;
Units from beginning inventory
----
-----
Units from March 2 purchase
195
$35
$6825
Units from June 30 purchase
240
$39
$9360
Total cost of goods sold
435
$16185
Ending inventory
290
$9770
(b). Weighted (Periodic);
Weighted (Periodic)
Units
Cost per unit
Total
Beginning inventory
190
$33
$6270
Purchases;
March 2
295
$35
$10325
June 30
240
$39
$9360
Total purchases
535
$19685
Goods available for sale
725
$35.80
$25955
Cost of goods sold
435
$35.80
$15573
Ending inventory
290
$35.80
$10382
(C). FIFO (Periodic);
FIFO (Periodic)
Units
Cost per unit
Total
Beginning inventory
190
$33
$6270
Purchases;
March 2
295
$35
$10325
June 30
240
$39
$9360
Total purchases
535
$19685
Goods available for sale
725
$25955
Cost of goods sold;
Units from beginning inventory
190
$33
$6270
Units from March 2 purchase
245
$35
$8575
Units from June 30 purchase
----
-----
-----
Total cost of goods sold
435
$14845
Ending inventory
290
$11110
(d). Specific identification (Periodic);
Specific identification (Periodic)
Units
Cost per unit
Total
Beginning inventory
190
$33
$6270
Purchases;
March 2
295
$35
$10325
June 30
240
$39
$9360
Total purchases
535
$19685
Goods available for sale
725
$25955
Cost of goods sold;
Units from beginning inventory
68
$33
$2244
Units from March 2 purchase
272
$35
$9520
Units from June 30 purchase
95
$39
$3705
Total cost of goods sold
435
$15469
Ending inventory
290
$10486
Working Note;
Value of ending inventory will be calculated as follow;
(122 units * $33) + (23 units * $35) + (145 units * $39)
= $4026 + $805 + $5655 = $10486
Question – 2(a);
Answer is option (First-in, First-out)
Explanation;
As per calculation under FIFO, method we see that cost of goods sold is lower in compare to other method. Hence Gross profit will be highest.
Question – 2(b);
Answer is option (Last-in, First-out)
Explanation;
As per calculation under LIFO, method we see that cost of goods sold is highest in compare to other method. Hence profit will be lowest and when profit is lowest then income taxes will be lowest.
LIFO (Periodic)
Units
Cost per unit
Total
Beginning inventory
190
$33
$6270
Purchases;
March 2
295
$35
$10325
June 30
240
$39
$9360
Total purchases
535
$19685
Goods available for sale
725
$25955
Cost of goods sold;
Units from beginning inventory
----
-----
Units from March 2 purchase
195
$35
$6825
Units from June 30 purchase
240
$39
$9360
Total cost of goods sold
435
$16185
Ending inventory
290
$9770
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