P6-3B Walz Company had a beginning inventory of 400 units of Product Ribo $8 per
ID: 2568573 • Letter: P
Question
P6-3B Walz Company had a beginning inventory of 400 units of Product Ribo $8 per unit, During the year, purchases were: Determine cost of goods sold and ending inventory using FIFO, LIFO, and average-cost with analysis. at a cost of Feb. 20 May 5 600 units at $9 500 units at $10 Aug. 12 Dec. 8 300 units at $11 200 units at $12 (LO 2) Walz Company uses a periodic inventory system. Sales totaled 1,500 units. (a) Determine the cost of goods available for sale. (b) Determine (1) the ending inventory and (2) the cost of goods sold under each of the Cost of goods sold: FIFO LIFO Average $14,475 (b) assumed cost flow methods (FIFO, LIFO, and average-cost). Prove the accu cost of goods sold under the FIFO and LIFO methods. $13,600 $15,200 (c) Which cost flow method results in (1) the lowest inventory amount for the b alance sheet, and (2) the lowest cost of goods sold for the income statement?Explanation / Answer
a. Cost of goods available for sale = Beginning inventory + Cost of goods purchased
= (400*8) + [(600*9) + (300*11) + (500*10) + (200*12)]
= 3,200 + 5,400 + 3,300 + 5,000 + 2,400
= 19,300
b. FIFO method
400 * 8 = 3,200
600 * 9 = 5,400
400 * 8 = 3,200
600 * 9 = 5,400
500 * 10 = 5,000
400 * 8 = 3,200
600 * 9 = 5,400
500 * 10 = 5,000
300 * 11 = 3,300
400 * 8 = 3,200
600 * 9 = 5,400
500 * 10 = 5,000
300 * 11 = 3,300
200 * 12 = 2,400
400 * 8 = 3,200
600 * 9 = 5,400
500 * 10 = 5,000
300 * 11 = 3,300
200 * 12 = 2,400
LIFO method
400 * 8 = 3,200
600 * 9 = 5,400
400 * 8 = 3,200
600 * 9 = 5,400
500 * 10 = 5,000
400 * 8 = 3,200
600 * 9 = 5,400
500 * 10 = 5,000
300 * 11 = 3,300
400 * 8 = 3,200
600 * 9 = 5,400
500 * 10 = 5,000
300 * 11 = 3,300
200 * 12 = 2,400
200 * 12 = 2,400
300 * 11 = 3,300
500 * 10 = 5,000
500 * 9 = 4,500
400 * 8 = 3,200
100 * 9 = 900
Cost per unit under weighted average method = Cost of units available for sale / No of units available for sale
= [(400 * 8) + (600 * 9) + (500 * 10) + (300 * 11) + (200 * 12)] / (400 + 600 + 500 + 300 + 200)
= (3,200 + 5,400 + 5,000 + 3,300 + 2,400) / 2,000
= 9.65
1.
Ending inventory under FIFO method = (300 * 11) + (200 * 12) = 5,700
Ending inventory under LIFO method = (400 * 8) + (100 * 9) = 4,100
Ending inventory under average cost method = (No of available for sale - No of units sold) * cost per unit
= (2,000 - 1,500) * 9.65 = 4,825
2.
Cost of goods sold under FIFO method = (400 * 8) + (600 * 9) + (500 * 10) = 13,600
Cost of goods sold under LIFO method = (200 * 12) + (300 * 11) + (500 * 10) + (500 * 9) = 15,200
Cost of goods sold under Weighted average method = 1,500 * 9.65 = 14,475
c.
1. LIFO method results in the lowest inventory for the Balance sheet as the prices are risisng
2. FIFO method results in the lowest cost of goods sold on the Income statement as the prices are rising
Date Particulars Units * Unit cost Ending Inventory Beginning Inventory 400 * 8 = 3,200 400 * 8 = 3,200 Feb. 20 Purchases 600 * 9 = 5,400400 * 8 = 3,200
600 * 9 = 5,400
May 5 Purchases 500 * 10 = 5,000400 * 8 = 3,200
600 * 9 = 5,400
500 * 10 = 5,000
Aug. 12 Purchases 300 * 11 = 3,300400 * 8 = 3,200
600 * 9 = 5,400
500 * 10 = 5,000
300 * 11 = 3,300
Dec. 8 Purchases 200 * 12 = 2,400400 * 8 = 3,200
600 * 9 = 5,400
500 * 10 = 5,000
300 * 11 = 3,300
200 * 12 = 2,400
Sales400 * 8 = 3,200
600 * 9 = 5,400
500 * 10 = 5,000
300 * 11 = 3,300
200 * 12 = 2,400
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