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  • ACC 225 Week 6 Problem 6-1A

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    Praveen Sudarsan
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    - The document provides cost of goods and inventory information for a company across multiple purchase dates. It includes beginning inventory, purchases, units available for sale, and ending inventory. - It calculates cost of goods sold and gross profit using four different inventory costing methods: FIFO, LIFO, specific identification, and weighted average. - Under the LIFO method, the company has the highest reported gross profit. Since the manager's bonus is based on a percentage of gross profit, the LIFO method would be preferred as it results in the highest bonus.

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    - The document provides cost of goods and inventory information for a company across multiple purchase dates. It includes beginning inventory, purchases, units available for sale, and ending inventory. - It calculates cost of goods sold and gross profit using four different inventory costing methods: FIFO, LIFO, specific identification, and weighted average. - Under the LIFO method, the company has the highest reported gross profit. Since the manager's bonus is based on a percentage of gross profit, the LIFO method would be preferred as it results in the highest bonus.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as XLSX, PDF, TXT or read online from Scribd
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    264 views6 pages

    ACC 225 Week 6 Problem 6-1A

    Uploaded by

    Praveen Sudarsan
    - The document provides cost of goods and inventory information for a company across multiple purchase dates. It includes beginning inventory, purchases, units available for sale, and ending inventory. - It calculates cost of goods sold and gross profit using four different inventory costing methods: FIFO, LIFO, specific identification, and weighted average. - Under the LIFO method, the company has the highest reported gross profit. Since the manager's bonus is based on a percentage of gross profit, the LIFO method would be preferred as it results in the highest bonus.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 6

    Ans.

    6-1A
    1)

    Cost of goods and number of units available for sale:


    Particulars
    Beginning inventory
    Purchases on 10th Feb.
    Purchases on 13th March
    Purchases on 21st Aug
    Purchases on 5th Sep.

    Units

    600
    200
    100
    160
    280
    1340
    Cost of goods available for sale = $59,440
    No. of units available for sale = 1340 units
    2)

    Rate per Unit


    Amount
    $44
    $26,400
    $40
    8,000
    $20
    2,000
    $60
    9,600
    $48
    13,440
    $59,440

    The number of units in ending inventory = 1,340 - 600 = 960 units

    3)
    FIFO
    Date
    Jan.1
    Feb. 10

    Units

    Mar.13

    Purchases
    Rate
    Amt.
    Units
    600
    $44
    $26,400
    200
    40
    8,000
    100

    20

    Aug. 21

    160

    60

    9,600

    Sep.5

    280

    48

    13,440

    Ending Inventory

    Amt.

    Units

    2,000

    Mar. 15

    Sep. 10

    Sales
    Rate

    400

    75

    30,000

    200

    44

    8,800

    600
    600
    200
    600
    200
    100
    200
    200
    100
    200
    200
    100
    160
    200
    200
    100
    160
    280
    200
    100
    160
    280
    740

    LIFO
    Date
    Jan.1
    Feb. 10

    Purchases
    Units
    Rate
    Amt.
    Units
    600
    $44
    $26,400
    200
    40
    8,000

    Mar.13

    100

    20

    Sales
    Rate

    Amt.

    Units
    600
    600
    200
    600
    200
    100
    500
    500
    160
    500
    160
    280
    500
    160
    80
    740

    2,000

    Mar. 15
    Aug. 21

    160

    60

    9,600

    Sep.5

    280

    48

    13,440

    Sep. 10

    400

    75

    30,000

    200

    44

    8,800

    Ending Inventory
    Specific Identification Method :
    Purchases
    Date
    Units
    Rate
    Amt.
    Units
    Jan.1
    600
    $44
    $26,400
    Feb. 10
    200
    40
    8,000
    Mar.13

    100

    20

    Aug. 21

    160

    60

    9,600

    Sep.5

    280

    48

    13,440

    Ending Inventory

    Amt.

    Units

    2,000

    Mar. 15

    Sep. 10

    Sales
    Rate

    500

    44

    22,000

    100

    20

    2,000

    600
    600
    200
    600
    200
    100
    100
    200
    100
    100
    200
    100
    160
    100
    200
    100
    160
    280
    100
    200
    160
    280
    740

    Weighted Average
    Date
    Jan.1
    Feb. 10

    Units

    Mar.13

    Purchases
    Rate
    Amt.
    Units
    600
    $44
    $26,400
    200
    40
    8,000

    100

    20

    4)

    160

    60

    9,600

    Sep.5

    280

    48

    13,440
    $59,440

    Units

    400

    75

    30,000

    200

    44

    8,800

    600
    600
    200
    800
    800
    100
    900
    500
    160
    660
    660
    280
    940
    740
    740

    Gross Profit calculation :


    Methods
    FIFO
    LIFO
    Specific Id
    WA

    5)

    Amt.

    2,000

    Mar. 15
    Aug. 21

    Sep. 10
    Ending Inventory

    Sales
    Rate

    Opening Inventory + Purchases Closing Inventory


    $59,440
    33,040
    $59,440
    35,440
    $59,440
    35,440
    $59,440
    34,055

    Cost of goods sold


    $26,400
    $24,000
    $24,000
    $25,385

    If the Company's manager earns a bonus based on a percent of gross profit, then out of the four costing methods ab
    the LIFO Method as it will have highest commission due to highest Gross Profit.

    Balance
    Rate
    Amt.
    $44
    $26,400
    $44
    $26,400
    40
    8,000
    $44
    $26,400
    40
    8,000
    20
    2,000
    44
    8,800
    40
    8,000
    20
    2,000
    44
    8,800
    40
    8,000
    20
    2,000
    60
    9,600
    44
    8,800
    40
    8,000
    20
    2,000
    60
    9,600
    48
    13,440
    40
    8,000
    20
    2,000
    60
    9,600
    48
    13,440
    33,040

    Balance
    Rate
    Amt.
    $44
    $26,400
    $44
    $26,400
    40
    8,000
    $44
    $26,400
    40
    8,000
    20
    2,000
    44
    22,000
    44
    22,000
    60
    9,600
    44
    22,000
    60
    9,600
    48
    13,440
    44
    22,000
    60
    9,600
    48
    3,840
    35,440

    Balance
    Rate
    Amt.
    $44
    $26,400
    $44
    $26,400
    40
    8,000
    $44
    $26,400
    40
    8,000
    20
    2,000
    44
    4,400
    40
    8,000
    20
    2,000
    44
    4,400
    40
    8,000
    20
    2,000
    60
    9,600
    44
    4,400
    40
    8,000
    20
    2,000
    60
    9,600
    48
    13,440
    44
    4,400
    40
    8,000
    60
    9,600
    48
    13,440
    35,440

    Balance
    Rate
    Amt.
    $44
    $26,400
    $44
    $26,400
    40
    8,000
    43
    34,400
    43
    34,400
    20
    2,000
    40.44444
    36,400
    40.44
    20,220
    60
    9,600
    45.18182
    29,820
    45.18
    29,819
    48
    13,440
    46.02
    43,259
    46.02
    34,055
    34,055

    Cost of goods sold

    Sales
    38,800
    38,800
    38,800
    38,800

    Gross Profit
    $12,400
    $14,800
    $14,800
    $13,415

    out of the four costing methods above,the manager will prefer

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