EXERCISE 6-5 (Continued)

Date
5/1
5/15
5/24

Units
30
25
13
68

Proof
Unit Cost
$ 9
11
12

Total Cost
$270
275
156
$701

AVERAGE-COST
Cost of goods available for sale ..........................................................
Less: Ending inventory (22 X $10.72*)................................................
Cost of goods sold ................................................................................

$965
236
$729

*Average unit cost is $10.72 computed as follows:

$965 (Cost of goods available for sale)
= $10.72 (rounded)
90 units (Total units available for sale)
Proof
68 units X $10.72 = $729
EXERCISE 6-6
(a)

FIFO
Beginning inventory (200 X $5) ...............................
Purchases
June 12 (300 X $6) .............................................
June 23 (500 X $7) .............................................
Cost of goods available for sale ..............................
Less: Ending inventory (160 X $7) .........................
Cost of goods sold ...................................................

$1,000
$1,800
3,500

Copyright 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solutions Manual (For Instructor Use Only)

5,300
6,300
1,120
$5,180

6-19

EXERCISE 6-6 (Continued)

AVERAGE-COST
Cost of goods available for sale .............................
Less: Ending inventory (160 X $6.30*) ..................
Cost of goods sold ...................................................

$6,300
1,008
$5,292

*Average unit cost is:

$6,300 (Cost of goods available for sale)
= $6.30
1,000 units (Total units available for sale)
(b) The FIFO method will produce the higher ending inventory because
costs have been rising. Under this method, the earliest costs are assigned
to cost of goods sold and the latest costs remain in ending inventory.
For Eastland Company, the ending inventory under FIFO is $1,120 or
(160 X $7) compared to $1,008 or (160 X $6.30) under average-cost.
(c) The average-cost method will produce the higher cost of goods sold
for Eastland Company. The cost of goods sold is $5,292 or [$6,300
$1,008] compared to $5,180 or ($6,300 $1,120) under FIFO.
EXERCISE 6-7
(a) (1)

FIFO
Beginning inventory ..........................................
Purchases ...........................................................
Cost of goods available for sale .......................
Less: ending inventory (75 X $130*) ................
Cost of goods sold.............................................

$10,000
26,000
36,000
9,750
$26,250

*$26,000 200
(2)

AVERAGE-COST
Beginning inventory ..........................................
Purchases ...........................................................
Cost of goods available for sale .......................
Less: ending inventory (75 X $120*) ................
Cost of goods sold.............................................

$10,000
26,000
36,000
9,000
$27,000

*[($10,000 + $26,000) (100 + 200)]

6-20

Copyright 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solutions Manual (For Instructor Use Only)

*EXERCISE 6-14
(1)
Date
Purchases
Jan. 1
8
10 (6 @ $648) $3,888
15

FIFO
Cost of Goods Sold
(2 @ $600) $1,200

(1 @ $600)
(3 @ $648) $2,544

(2)

Balance
(3 @ $600) $1,800
(1 @ $600)
600
(1 @ $600)
4,488
(6 @ $648)
(3 @ $648)

1,944

MOVING-AVERAGE COST
Date
Purchases
Cost of Goods Sold
Jan. 1
8
(2 @ $600)
$1,200
10 (6 @ $648) $3,888
15
(4 @ $641.14) $2,565

Balance
(3 @ $600)
$1,800
(1 @ $600)
600
(7 @ $641.14)* 4,488
(3 @ $641.14) 1,923

*Average-cost = ($600 + $3,888) 7 = $641.14 (rounded)

*EXERCISE 6-15
The cost of goods available for sale is:
June 1 Inventory
200 @ $5
June 12 Purchase
300 @ $6
June 23 Purchase
500 @ $7
Total cost of goods available for sale

6-24

$1,000
1,800
3,500
$6,300

Copyright 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solutions Manual (For Instructor Use Only)

*EXERCISE 6-15 (Continued)

(1)
Date
June 1
June 12

Purchases
(300 @ $6) $1,800

June 15
June 23

FIFO
Cost of Goods Sold

(200 @ $5)
(200 @ $6)

$1,000
1,200

(500 @ $7) $3,500

June 27

Balance
(200 @ $5)
$1,000
(200 @ $5)
$2,800
(300 @ $6)

(100 @ $6)
(340 @ $7)

600
2,380
$5,180

(100 @ $6)
(100 @ $6)
(500 @ $7)
(160 @ $7)

$ 600

$4,100

$1,120

Ending inventory: $1,120. Cost of goods sold: $6,300 $1,120 = $5,180.

(2)
Date
June 1
June 12
June 15
June 23
June 27

Purchases

Moving-Average Cost
Cost of Goods Sold

(300 @ $6) $1,800

(400 @ $5.60)
(500 @ $7) $3,500
(440 @ $6.767)

Balance
(200 @ $5)
(500 @ $5.60)
$2,240 (100 @ $5.60)
(600 @ $6.767)
$2,977 (160 @ $6.767)
$5,217

$1,000
$2,800
$ 560
$4,060
$1,083

Ending inventory: $1,083. Cost of goods sold: $6,300 $1,083 = $5,217.

(b)

FIFO gives the same ending inventory and cost of goods sold values
under both the periodic and perpetual inventory system. Moving
average gives different ending inventory and cost of goods sold
values under the periodic and perpetual inventory systems, due to the
average calculation being based on different pools of costs.

(c)

The simple average would be [($5 + $6 + $7) 3)] or $6. However, the
moving-average cost method uses a weighted-average unit cost that
changes each time a purchase is made rather than a simple average.

Copyright 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solutions Manual (For Instructor Use Only)

6-25

PROBLEM 6-5A

Cost of Goods Available for Sale

Date
Explanation
October 1 Beginning Inventory
9 Purchase
17 Purchase
25 Purchase
Total
Ending Inventory in Units:
Units available for sale
Sales (100 + 65 + 120)
Units remaining in ending inventory

Units
60
120
70
80
330
330
285
45

Unit Cost
24
26
27
28

Total Cost
1,440
3,120
1,890
2,240
8,690

Sales Revenue
Unit
Date
Units Price Total Sales
October 11
100
35
3,500
22
65
40
2,600
29
120
40
4,800
285
10,900

(a)
(1) FIFO
(i) Ending Inventory
October 25 45 @ 28 = 1,260

(iii) Gross Profit

Sales revenue
Cost of goods sold
Gross profit

6-36

10,900
7,430
3,470

(ii) Cost of Goods Sold

Cost of goods available
for sale
Less: Ending inventory
Cost of goods sold

8,690
1,260
7,430

(iv) Gross Profit Rate

Gross profit
3,470
= 31.8%
Net sales
10,900

Copyright 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solutions Manual (For Instructor Use Only)

PROBLEM 6-5A (Continued)

(2) Average-Cost
Weighted-average cost per unit:

cost of goods available for sale

units available for sale
8,690
330

(i)

Ending Inventory
45 @ 26.333 = 1,185*
*rounded to nearest dollar

(iii) Gross Profit

Sales revenue
Cost of goods sold
Gross profit

10,900
7,505
3,395

= 26.333

(ii) Cost of Goods Sold

Cost of goods available
for sale
Less: Ending inventory
Cost of goods sold

8,690
1,185
7,505

(iv) Gross Profit Rate

Gross profit 3,395
= 31.1%
Net sales
10,900

(b) Average-cost produces the lower ending inventory value, gross profit,
and gross profit rate because its cost of goods sold is higher than
FIFO.

Copyright 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solutions Manual (For Instructor Use Only)

6-37