PA7-1 Analyzing the Effects of Four Alternative Inventory Methods in a Periodic
ID: 2589441 • Letter: P
Question
PA7-1 Analyzing the Effects of Four Alternative Inventory Methods in a Periodic Inventory System [LO 7-3]
Gladstone Company tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31.
Assuming that for Specific identification method (item 1d) the March 14 sale was selected two-fifths from the beginning inventory and three-fifths from the purchase of January 30. Assume that the sale of August 31 was selected from the remainder of the beginning inventory, with the balance from the purchase of May 1.
Compute the amount of goods available for sale, ending inventory, and cost of goods sold at December 31 under each of the following inventory costing methods: (Round intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.)
Gladstone Company tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31.
Explanation / Answer
Answer :
Units available for sale = 3,100 + (4,850 + 3,550)
Units available for sale =11,500 units
Ending Inventory = Units available for sale – Units sold
Units sold = 3,000 + 3,600 = 6,600 units
Ending Inventory = 11,500 – 6,600 = 4,900 units
Answer to Part a) - LAST-IN, FIRST-OUT:
Amount of goods available for Sale = Beginning Inventory + Cots of Purchases
Beginning Inventory = (3,100 * $55) = $170,500
Cost of Purchases= (4,850 * $66) + (3,550 * $85)
Cost of Purchases= $320,100 + $301,750
Cost of Purchases= $621,850
Amount of goods available for Sale = $170,500 + $621,850
Amount of goods available for Sale = $792,350
Ending Inventory = (3,100 * $55) + (1,800 * $66)
Ending Inventory = $170,500 + $118,800
Ending Inventory = $289,300
Cost of Goods sold = Amount of goods available for Sale – Ending Inventory
Cost of Goods sold = $792,350 - $289,300
Cost of Goods sold = $503,050
Answer to Part b) – WEIGHTED AVERAGE COST:
Amount of goods available for Sale = Beginning Inventory + Cots of Purchases
Beginning Inventory = (3,100 * $55) = $170,500
Cost of Purchases= (4,850 * $66) + (3,550 * $85)
Cost of Purchases= $320,100 + $301,750
Cost of Purchases= $621,850
Amount of goods available for Sale = $170,500 + $621,850
Amount of goods available for Sale = $792,350
Weighted Average Cost per unit = Amount of goods available for Sale/ Units available for Sale
Weighted Average Cost per unit = 792,350 / 11,500
Weighted Average Cost per unit = $68.90
Cost of Goods sold = $68.90* 6,600
Cost of Goods sold = $454,740
Ending Inventory = $68.90 * 4,900
Ending Inventory = $337,610
Answer to Part c) – FIRST-IN, FIRST-OUT:
Amount of goods available for Sale = Beginning Inventory + Cots of Purchases
Beginning Inventory = (3,100 * $55) = $170,500
Cost of Purchases= (4,850 * $66) + (3,550 * $85)
Cost of Purchases= $320,100 + $301,750
Cost of Purchases= $621,850
Amount of goods available for Sale = $170,500 + $621,850
Amount of goods available for Sale = $792,350
Cost of Goods sold = (3,100 * $55) + (3,500 * $66)
Cost of Goods sold = $170,500 + $231,000
Cost of Goods sold = $401,500
Ending Inventory = (1,350 * $66) + (3,550 * $85)
Ending Inventory = $89,100 + $301,750
Ending Inventory = $390,850
Answer to Part c) – SPECIAL IDENTIFICATION:
Amount of goods available for Sale = Beginning Inventory + Cots of Purchases
Beginning Inventory = (3,100 * $55) = $170,500
Cost of Purchases= (4,850 * $66) + (3,550 * $85)
Cost of Purchases= $320,100 + $301,750
Cost of Purchases= $621,850
Amount of goods available for Sale = $170,500 + $621,850
Amount of goods available for Sale = $792,350
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