Problem 11-5

Units Unit cost

1. FIFO - periodic
Lot No. 4 500 100.00
5 14,500 90.00
15,000

2. Beginning inventory 10,000 80.00

Purchases: Lot No. 1 2,000 100.00
2 8,000 110.00
3 6,000 120.00
4 9,500 100.00
5 14,500 90.00
Goods available for sale 50,000

Weighted average (4,855,000/50,000) 15,000 97.10

3. Specific identification
Lot 3 6,000 120.00
4 9,000 100.00
15,000

Goods available Inventory-Dec. 31 Cost of sales

FIFO 4,855,000 1,355,000 3,500,000.00
Weighted average 4,855,000 1,456,500 3,398,500.00
Specific identification 4,855,000 1,620,000 3,235,000.00
Total cost

50,000.00
1,305,000.00
1,355,000.00

800,000.00
200,000.00
880,000.00
720,000.00
950,000.00
1,305,000.00
4,855,000.00

1,456,500.00

720,000.00
900,000.00
1,620,000.00

Cost of sales
3,500,000.00
3,398,500.00
3,235,000.00
Problem 11-6

Units Unit cost

FIFO
December 17 10,000 45.00
22 20,000 43.00
30,000
Average method
December 1 10,000 52.00
7 30,000 50.00
17 60,000 45.00
22 20,000 43.00
Available for sale 120,000

Inventory (5,580,000/120,000) 30,000 46.50

FIFO
Goods available for sale 5,580,000.00
Less: Inventroy - December 31 1,310,000.00
Cost of goods sold 4,270,000.00
Total cost

450,000.00
860,000.00
1,310,000.00

520,000.00
1,500,000.00
2,700,000.00
860,000.00
5,580,000.00

1,395,000.00

Average
5,580,000.00
1,395,000.00
4,185,000.00
Problem 11-7

The stock cards are not prepared anymore. The end results are simply given.

Units Unit cost Total cost

FIFO
Ending inventory 4,000 210.00 840,000.00

Cost of sales 2,700,000.00

Average method
Ending inventory 4,000 252.50 1,010,000.00

Cost of sales 2,530,000.00

Problem 11-8

Purchases Sales
2011 5,000.00 4,000.00
2012 9,000.00 7,000.00
2013 15,000.00 12,000.00
Total inventory-December 31, 2012 (units)

Sales
Cost of sales:
Inventory - December 31, 2011 (3,000 x 60)
Purchases
Goods available for sale
Less: Inventory - December 31, 2012 (6,000 x 75)
Gross income
Inventory increment
1,000.00
2,000.00
3,000.00
6,000.00

1,200,000.00

180,000.00
1,125,000.00
1,305,000.00
450,000.00 855,000.00
345,000.00
Problem 11-9

Units Unit cost

FIFO
October 1 15,000 60.00

Weighted average - periodic

January 1 10,000 40.00
April 1 15,000 50.00
October 1 25,000 60.00
Goods available for sale 50,000
Less: Sales 35,000
Ending inventory 15,000

Weighted average (2,650,000/50,000) 15,000 53.00

Units Unit cost

Moving average - perpetual
January 1 10,000 40.00
31 (5,000) 40.00
Balance 5,000 40.00
April 1 15,000 50.00
Total 20,000 47.50
July 31 (18,000) 47.50
Balance 2,000 47.50
October 1 25,000 60.00
Total 27,000 59.07
December 31 (12,000) 59.07
Balance 15,000 59.07

FIFO Weighted average

Inventory - January 1 400,000 400,000.00
Purchases 2,250,000 2,250,000.00
Goods available for sale 2,650,000 2,650,000.00
Less: Inventory - December 31 900,000 795,000.00
Cost of sales 1,750,000 1,855,000.00

Cost of sales - Weighted average perpetual

January 31 Sale
July 31 Sale
December 31 Sale
Total cost of sales
Total cost

900,000.00

400,000.00
750,000.00
1,500,000.00
2,650,000.00

795,000.00

Total cost

400,000.00
(200,000.00)
200,000.00
750,000.00
950,000.00
(855,000.00)
95,000.00
1,500,000.00
1,595,000.00
(708,840.00)
886,160.00

200,000.00
855,000.00
708,840.00
1,763,840.00
Problem 11-10

Units Unit cost

FIFO
October 1 purchase 300 10,000.00

Weighted average
January 1 200 7,500.00
April 5 300 9,000.00
October 1 500 10,000.00
Goods available for sale 1,000

Inventory - December 31 (9,200,000/1,000) 300 9,200.00

FIFO Weighted average

Inventory - January 1 1,500,000 1,500,000.00
Purchases 7,700,000 7,700,000.00
Goods available for sale 9,200,000 9,200,000.00
Les: Inventory - December 31 3,000,000 2,760,000.00
Cost of goods sold 6,200,000 6,440,000.00
Total cost

3,000,000.00

1,500,000.00
2,700,000.00
5,000,000.00
9,200,000.00

2,760,000.00
Problem 11-11

Sales 6,000,000.00
Gross profit (2,400,000.00)
Cost of goods sold 3,600,000.00
Inventory - July 31 (see below) 928,000.00
Cost of goods available for sale 4,528,000.00
PurchaPurchase (3,174,000.00)
Inventory - July 1 1,354,000.00

Quantity Unit cost Total cost

July 12 1,000 60 60,000.00
25 14,000 62 868,000.00
FIFO inventory - July 31 15,000 928,000.00
Problem 11-12

1. Cost of units available for sale for July 1,452,100.00

Purchases for July (1,042,100.00)
Cost of inventory - July 1 410,000.00

Number of units - July 1 (410,000/P4) 102,500.00

2. July 1 inventory 102,500.00

Purchases for July 200,000.00
Total units available for sale for July 302,500.00
July 31 inventory (60,000.00)
Units sold during the month of July 242,500.00

3. Average unit cost (1,452,100/302,500) 4.80

Inventory - July 31 (60,000 x 4.80) 288,000.00

Another computation ( 1,452,100 - 1,164,100) 288,000.00

Problem 11-14

Units Average unit cost Total cost

1. Inventory - December 31, 2012
2012 layer 11,000 138 1,518,000.00

2. Inventory - December 31, 2011 14,000 1,480,000.00

Purchases - 2012 12,000 138 1,656,000.00
Materials available 26,000 3,136,000.00
Less: Inventory - December 31, 2012 11,000 1,518,000.00
Raw materials used - 2012 15,000 1,618,000.00

3. Inventory - December 31, 2013

2013 layer 15,000 153 2,295,000.00

4. Inventory - December 31, 2012 11,000 1,518,000.00

Purchases - 2013 20,000 153 3,060,000.00
Materials available 31,000 4,578,000.00
Less: Inventory - December 31, 2013 15,000 2,295,000.00
Raw materials used - 2013 16,000 2,283,000.00
Problem 11-15

Available for sale 42,000.00

Units sold (2,800,000/100) 28,000.00
Ending inventory 14,000.00

Units Unit cost Total cost

FIFO
September 5 2,000 43.00 86,000.00
25 12,000 42.50 510,000.00
14,000 596,000.00

Weighted average (1,753,500/42,000) 14,000 41.75 584,500.00

Average FIFO
Available for sale 1,753,000.00 1,753,500.00
Less: Ending inventory 584,500.00 596,000.00
Cost of sales 1,168,500.00 1,157,500.00

(Sch. 1) (Sch. 2)
Requirement A. Cost of Ending Inventory under FIFO

Units Unit Cost Total Cost

Jan. 1 Balance 500 500 250,000
Jan. 9 Purchase 1,500 540 810,000
Jan. 29 Purchase 500 600 300,000
2,500 1,360,000
January 31 Inventory cost is at 750 Units
Unit Unit Cost Total Cost
From Jan. 9 Purchase 250 540 135,000
From Jan. 29 Purchase 500 600 300,000
750 435,000

Cost of Ending Inventory Jan. 31 435,000

Requirement B. Cost of Goods Sold under Average Method

Inventory - January 1 250,000

Purchases 1,110,000
Goods Available for Sale 1,360,000

Inventory - January 31 (408,000)

Cost of Goods Sold 952,000
Problem 11-17

2013 2014
Cost of sales - Average 1,500,000.00 2,000,000.00
Understatement of ending inventory:
2012 (150,000.00) 150,000.00
2013 (200,000.00) 200,000.00
2014
Cost of sales - FIFO 1,350,000.00 1,950,000.00

Sales 3,000,000.00 4,000,000.00

Cost of sales - FIFO 1,350,000.00 1,950,000.00
Gross income 1,650,000.00 2,050,000.00
Operating expenses 800,000.00 900,000.00
Operating income 850,000.00 1,150,000.00

Proof
Net income - Average 700,000.00 1,100,000.00
Understatement of ending inventory:
2012 150,000.00 (150,000.00)
2013 200,000.00
2014
Net income - FIFO 850,000.00 1,150,000.00
 2015
2,400,000.00

(270,000.00)
2,330,000.00

4,800,000.00
2,330,000.00
2,470,000.00
1,000,000.00
1,470,000.00

1,400,000.00

(200,000.00)
270,000.00
1,470,000.00
Problem 11-19

Lower of
Units cost or NRV Inventory value
Materials:
R 1,000 100.00 100,000.00
S 2,000 250.00 500,000.00
T 3,000 300.00 900,000.00

Goods in process:
X 4,000 480.00 1,920,000.00
Y 5,000 620.00 3,100,000.00

Finished goods:
A 2,000 790.00 1,580,000.00
B 2,000 730.00 1,460,000.00

Valuation at lower of cost or NRV 9,560,000.00

Problem 11-20
(lower of cost or NRV)
Units Unit cost NRV Inventory value
A 1,000 120.00 150.00 120,000.00
B 1,500 110.00 120.00 165,000.00
C 1,200 150.00 140.00 168,000.00
D 1,800 140.00 160.00 252,000.00
E 1,700 130.00 160.00 221,000.00
926,000.00
Problem 11-21

Product Unit cost NRV Lower of cost or NRV

1 700.00 650.00 650.00
2 475.00 745.00 475.00
3 255.00 250.00 250.00
4 450.00 740.00 450.00
Problem 11-22

Units Unit cost NRV Lower of cost or NRV

Appliances:
A 500 2,500.00 2,700.00 1,250,000.00
B 300 3,700.00 3,600.00 1,080,000.00

Car accessories:
C 600 1,400.00 2,000.00 840,000.00
D 800 2,100.00 2,000.00 1,600,000.00
Valuation at lower of cost or NRV 4,770,000.00
f cost or NRV
Problem 11-23

1. September 30 (40,000 x 75) 3,000,000.00

December 31 (10,000 x 90) 900,000.00
Total FIFO cost 3,900,000.00
NRV (50,000 x 72) 3,600,000.00
Loss on inventory writedown 300,000.00

Inventory - January 1 1,200,000.00

Purchases 9,400,000.00
Purchase discount (400,000.00)
Goods available for sale 10,200,000.00
Less: Inventory - December 31 3,900,000.00
Cost of goods sold before inventory writedown 6,300,000.00
Loss on inventory writedown 300,000.00
Cost of goods sold after inventory writedown 6,600,000.00

2. Inventory - December 31 3,900,000.00

Income summary 3,900,000.00

Loss on inventory writedown 300,000.00

Allowance for inventory writedown 300,000.00
Problem 11-24

a. No adjustment is necessary because the market price is higher than the agreed price. Any
gain on purchase commitment is not recognized.

b. No adjustment is necessary because the market price has not declined as of December 31,
2013. The market decline is only a possible loss.

c. Loss on purchase commitment (10,000 x 30)

Estimated liability for purchase commitment

d. Purchases (100,000 x 150)

Loss on purchase commitment
Estimated liability for purchase commitment
Accounts payable (10,000 x 200)

e. Purchases
Estimated liability for purchase commitment
Accounts payable
Gain on purchase commitment
 300,000.00
300,000.00

1,500,000.00
200,000.00
300,000.00
2,000,000.00

2,000,000.00
300,000.00
2,000,000.00
300,000.00
Problem 11-25

12/31/2013 Loss on purchase commitment 500,000.00

Estimated liability for Purchase Commitment 500,000.00

03/31/2014 Purchase (100,000 x 54) 5,400,000.00

Estimated liability for Purchase Commitment 500,000.00
Accounts payable 5,500,000.00
Gain in purchase commitment 400,000.00
Problem 11-26

Purchase price 26,850,000.00

Improving and subdividing cost 43,500,000.00
Total cost 70,350,000.00

Sales price Fraction Cost

Group
1 (20 x 3,000,000) 60,000,000.00 60/105 40,200,000.00
2 (10 x 2,500,000) 25,000,000.00 25/105 16,750,000.00
3 (10 x 2,000,000) 20,000,000.00 20/105 13,400,000.00
105,000,000.00 70,350,000.00

Cost per lot Unsold Cost

Group
1 (40,200,000/20) 2,010,000.00 5.00 10,050,000.00
2 (16,740,000/10) 1,675,000.00 4.00 6,700,000.00
3 (13,400,000/10) 1,340,000.00 3.00 4,020,000.00
20,770,000.00
Problem 11-27

Purchase price 18,000,000.00

Improving and subdividing cost 41,500,000.00
Total cost 59,500,000.00

Sales price Fraction Cost

Group
1 20 1,000,000 20,000,000.00 0.20 11,900,000.00
2 40 750,000 30,000,000.00 0.30 17,850,000.00
3 100 500,000 50,000,000.00 0.50 29,750,000.00
100,000,000.00 59,500,000.00
Problem 11-28

Aye Company
Units
January 1 8,000.00
Purchases 25,000.00
Goods available for sale 33,000.00

Inventory - December 31 (1,056,000 / 33,000 = 32 x 10,000)

Bee Company
Sales price Fraction
Class A (25 x 400,000) 10,000,000.00 10/20
Class B (30 x 300,000) 9,000,000.00 9/20
Class C (10 x 100,000) 1,000,000.00 1/20
20,000,000.00

Cost per lot Unsold

Class A (6,250,000 / 25) 250,000.00 15.00
Class B (5,625,000 / 30) 187,500.00 6.00
Class C (625,000 / 10) 62,500.00 3.00
Total inventory

Cee Company

Inventory per book

Beds received December 30, 2011 recorded January 2, 2013
Beds received recorded twice
Beds shipped FOB shipping point on December 30, 2011 recorded January 2013
Beds on hand unrecorded
Correct inventory
 Cost
240,000.00
816,000.00
1,056,000.00

320,000.00

Cost
6,250,000.00
5,625,000.00
625,000.00
12,500,000.00

Cost
3,750,000.00
1,125,000.00
187,500.00
5,062,500.00

1,960,000.00
900,000.00
(190,000.00)
(700,000.00)
230,000.00
2,200,000.00