Required information Problem 6-2AA Periodic: Alternative cost flows LO P3 The fo
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Question
Required information Problem 6-2AA Periodic: Alternative cost flows LO P3 The following information applies to the questions displayed below.] Warnerwoods Company uses a periodic inventory system. It entered into the following purchases and sales transactions for March. Date Mar. Mar.5 Purchase Mar. 9 Sales Mar. 18 Purchase Mar. 25 Purchase Mar. 29 Sales Activities Units Sold at Retail Units Acquired at Cost 185 units $75 per unit 485 units $80 per unit 1 Beginning inventory 505 units $110 per unit 290 units $85 per unit 370 units $87 per unit 330 units $120 per unit 835 units Totals 1,330 units For specific identification, the March 9 sale consisted of 40 units from beginning inventory and 465 units from the March 5 purchase; the March 29 sale consisted of 125 units from the March 18 purchase and 205 units from the March 25 purchaseExplanation / Answer
Solution:
Periodic Inventory system is a system of inventory in which inventories are updated on a periodic basis. Periodic basis may be monthly, quarterly, weekly, half yearly or yearly. In this system, inventories are not kept up to date.
Part 1 – Cost of Goods Available for Sale and number of units available for sale
Cost of Goods Available for sale
# of Units
Cost per Unit
Cost of Goods Available for Sale
Beginning Inventory
185
$75.00
$13,875
Purchases:
March.5
485
$80.00
$38,800
March.18
290
$85.00
$24,650
March.25
370
$87.00
$32,190
Total
1330
$109,515
Part2 – Number of units in ending inventory
Ending Inventory = Units Available for Sale – Total Sold Units = 1330 Units – 835 Units = 495 Units
Part 3(a) – Cost Assigned to Ending Inventory using FIFO method
FIFO method says the oldest units are sold first.
Periodic - FIFO
Cost of Goods Available for sale
Cost of Goods Sold
Ending Inventory
# of Units
Cost per Unit
Cost of Goods Available for Sale
# of Units sold
Cost per Unit
Cost of Goods Sold
# of Units in ending inventory
Cost per Unit
Ending Inventory
Beginning Inventory
185
$75.00
$13,875
185
$75.00
$13,875
0
$0.00
$0
Purchases:
March.5
485
$80.00
$38,800
485
$80.00
$38,800
0
$0.00
$0
March.18
290
$85.00
$24,650
165
$85.00
$14,025
125
$85.00
$10,625
March.25
370
$87.00
$32,190
0
$87.00
$0
370
$87.00
$32,190
Total
1330
$109,515
835
$66,700
495
$42,815
Part 3(b) – Cost Assigned to Ending Inventory using LIFO method
LIFO method says the newest purchased units are sold first
Periodic - LIFO
Cost of Goods Available for sale
Cost of Goods Sold
Ending Inventory
# of Units
Cost per Unit
Cost of Goods Available for Sale
# of Units sold
Cost per Unit
Cost of Goods Sold
# of Units in ending inventory
Cost per Unit
Ending Inventory
Beginning Inventory
185
$75.00
$13,875
0
$0.00
$0
185
$75.00
$13,875
Purchases:
March.5
485
$80.00
$38,800
175
$80.00
$14,000
310
$80.00
$24,800
March.18
290
$85.00
$24,650
290
$85.00
$24,650
0
$0.00
$0
March.25
370
$87.00
$32,190
370
$87.00
$32,190
0
$0.00
$0
Total
1330
$109,515
835
$70,840
495
$38,675
Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you
Pls ask separate question for remaining parts.
Cost of Goods Available for sale
# of Units
Cost per Unit
Cost of Goods Available for Sale
Beginning Inventory
185
$75.00
$13,875
Purchases:
March.5
485
$80.00
$38,800
March.18
290
$85.00
$24,650
March.25
370
$87.00
$32,190
Total
1330
$109,515
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