Question

Montoure Company uses a perpetual inventory system. It entered into the following calendar-year purchases and sales transactions. (For specific identification, units sold consist of 600 units from beginning inventory, 300 from the February 10 purchase, 200 from the March 13 purchase, 50 from the August 21 purchase, and 250 from the September 5 purchase.) Date Activities Units Acquired at Cost Units Sold at Retail Jan. 1 Beginning inventory 600 units @ $45.00 per unit Feb. 10 Purchase 400 units @ $42.00 per unit Mar. 13 Purchase 200 units @ $27.00 per unit Mar. 15 Sales 800 units @ $75.00 per unit Aug. 21 Purchase 100 units @ $50.00 per unit Sept. 5 Purchase 500 units @ $46.00 per unit Sept. 10 Sales 600 units @ $75.00 per unit Totals 1,800 units 1,400 units Required 1.Compute cost of goods available for sale and the number of units available for sale. 2.Compute the number of units in ending inventory. 3.Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification. (Round all amounts to cents.) Check (3) Ending inventory: FIFO, $18,400; LIFO, $18,000; WA, $17,760 4.Compute gross profit earned by the company for each of the four costing methods in part 3. (4) LIFO gross profit, $45,800

Answer 1

Answer:

1. $77,200 Cost of goods available for sale & 1,800 units available for sale

2. 400 units in ending inventory

3. FIFO $18,400, LIFO $18,000, WEIGHTED AVERAGE $17,760 and SPECIFIC $18,200

4. FIFO $46,200, LIFO $45,800, WEIGHTED AVERAGE $45,560 and SPECIFIC $46,000

Explanation:

1. Cost of goods available for sale is computed as follows:

1-Jan  600   45   27,000

10-Feb  400   42   16,800

13-Mar  200   27   5,400

21-Aug  100   50    5,000

5-Sep  500   46   23,000

     1,800    77,200

2.Units ending inventory is computed by deducting available units for sale 1,800 by the units sold 1,400 equals 400 units.

3. Ending inventory is computed as follows:

            FIFO  

5-Sep  400 x $46 = $18,400.00

                    LIFO  

Jan 1        400 x $45 = $18,000.00

           SPECIFIC    

10-Feb  100 x $42 = 4,200.00

21-Aug    50 x $50 = 2,500.00

5-Sep  250 x $46 = 11,500.00

        400        18,200.00

          WEIGHTED AVERAGE  

Jan 1      600 x $45.00  = 27,000.00

10-Feb   400 x $42.00  = 16,800.00

13-Mar   200 x $27.00  =   5,400.00

            1,200     41.00      49,200.00

Sales    (800)  x $41.00 =  (32,800.00)

Total      400     $41.00      16,400.00

21-Aug   100  x  $50.00   = 5,000.00

5-Sep    500  x $46.00    = 23,000.00

Total    1,000      $44.40       44,400.00

Sale     (600)       $44.40     (26,640.00)

Balance  400       $44.40      17,760.00

4. computation of gross profit are as follows:

                       FIFO  

SALE    

15-Mar  800.00   75.00   60,000.00  

10-Sep  600.00   75.00   45,000.00  

           1,400.00              105,000.00  

   

COGS         FIFO  

Date      Units  Price  Amount

1-Jan        600   45   27,000  

10-Feb     200   42   8,400  

10-Feb 200    42  8,400  

13-Mar      200   27   5,400  

21-Aug      100   50   5,000  

5-Sep       100   46   4,600  

TOTAL  1,400   252   58,800  

GROSS PROFIT    $46,200 ($105,000 - $58,800)

   

                            LIFO  

SALE    

15-Mar  800   75.00   60,000.00  

10-Sep  600   75.00   45,000.00

TOTAL 1,400             105,000.00  

   

COGS         LIFO  

Date      Units  Price  Amount

1-Jan      200   45        9,000  

10-Feb   200   42        8,400  

10-Feb   200 42         8,400  

13-Mar   200   27          5,400  

21-Aug  100    50          5,000  

5-Sep    500   46         23,000  

           1,400                 59,200  

GROSS PROFIT    $45,800  (105,000 - 59,200)

   

SALE                SPECIFIC  

Date      Units  Price  Amount

1 Jan        600   75     45,000  

10-Feb      300  75     22,500  

13-Mar     200   75      15,000  

21-Aug       50   75        3,750  

5-Sep      250   75       18,750  

TOTAL    1,400          105,000  

   

COGS SPECIFIC  

Date      Units  Price  Amount

01-Jan     600   45      27,000  

10-Feb     300   42       12,600  

13-Mar      200   27        5,400  

21-Aug        50   50       2,500  

5-Sep       250   46        11,500  

TOTAL   1,400              59,000  

GROSS PROFIT    $46,000 (105,000 - 59,000)  

          WEIGHTED AVERAGE  

Date      Units  Price     Amount

1-Jan       600   45.00   27,000.00

10-Feb    400   42.00   16,800.00

13-Mar    200   27.00    5,400.00

             1,200   41.00  49,200.00

Sale       (800)   41.00  (32,800.00)

Total       400   41.00   16,400.00

21-Aug    100   50.00   5,000.00

5-Sep     500   46.00   23,000.00

Total    1,000   44.40   44,400.00

Sales   (600)  44.40   (26,640.00)

Balance  400   44.40   17,760.00

Therefore, the computation of cost of goods sold is,

COST OF GOODS SOLD  

15-Mar  800   41.00   32,800.00

10-Sep  600   44.40   26,640.00

Total     1,400             59,440.00

SALE  

15-Mar     800   75.00   60,000.00

10-Sep     600   75.00   45,000.00

Total     1,400                105,000.00

Gross profit    $45,560.00 (105,000 - 59,440)

Answer 2

Answer:

The gross profit will be $ 45 800

Explanation:

1. The cost of goods available for sale will be calculated as follows:

1      Jan   600  45    27 000

10    Feb  400  42    16 800

13    Mar  200   27    5 400

21    Aug  100    50   5 000

5     Sep   500   46   23 000

2. The units ending the inventory will be calculated by deducting the available units for sale, that is, 1 800 by the units sold. Thus, 1 400 equals 400 units.

3. The ending inventory is calculated as follows:

FIFO

5 Sept

400 × $ 46 =  $ 18 400

LIFO

Jan 1

400 × $ 45 = $ 18 000

SPECIFIC

10 Feb

100 × $ 42 =  $ 4 200

21 Aug

50 × $ 50 = $ 2 500

5 Sept

250 × $ 46 = $ 11 500

Total (400)  = $ 18 200

WEIGHED AVERAGE

Jan 1

600 × $ 45 = $ 27 000

10 Feb

400 × $ 42 = $ 16 800

Computing and completing the balance sheet gives the gross profit:

Gross profit = $ 105 000 - $ 59 200

                    = $   45 800