The beginning inventory for Midnight Supplies and data on purchases and sales for a three-month period are shown in Problem 7-1A.

The beginning inventory for Midnight Supplies and data on purchases and sales for a three-month period are shown in Problem 7-1A.

Instructions

1. Determine the inventory on March 31 and the cost of merchandise sold for the three-month period, using the first-in, first-out method and the periodic inventory system.

2. Determine the inventory on March 31 and the cost of merchandise sold for the three-month period, using the last-in, first-out method and the periodic inventory system.

3. Determine the inventory on March 31 and the cost of merchandise sold for the three-month period, using the weighted average cost method and the periodic inventory system. Round the weighted average unit cost to the nearest cent.

4. Compare the gross profit and the March 31 inventories, using the following column headings:

FIFO LIFO Weighted Average Sales Cost of merchandise sold Gross profit Inventory, March 31

Answer:

1. First-In, First-Out Method

Merchandise inventory, March 31................................................ $ 1,010,625

Cost of merchandise sold........................................................... 10,891,875

Supporting computations

Inventory:

Units in beginning inventory and purchased................................. 136,500

Units sold................................................................................ 125,250

Units in ending inventory........................................................... 11,250

7,500 units @ $90.00............................................................ $ 675,000

3,750 units @ $89.50............................................................ 335,625

11,250 units.......................................................................... $1,010,625

Cost of merchandise sold:

Beginning inventory, January 1................................................... $ 562,500

Purchases................................................................................. 11,340,000

Merchandise available for sale................................................... $11,902,500

Ending inventory, March 31......................................................... 1,010,625

Cost of merchandise sold........................................................... $10,891,875

* $1,912,500 + $4,725,000 + $4,027,500 + $675,000

2. Last-In, First-Out Method

Inventory, March 31..................................................................... $ 881,250

Cost of merchandise sold........................................................... 11,021,250

Supporting computations

Inventory:

7,500 units @ $75.00............................................................ $562,500

3,750 units @ $85.00............................................................ 318,750

11,250 units......................................................................... $881,250

Cost of merchandise sold:

Beginning inventory, January 1................................................... $ 562,500

Purchases................................................................................. 11,340,000

Merchandise available for sale................................................... $11,902,500

Ending inventory, March 31......................................................... 881,250

Cost of merchandise sold............................................................$11,021,250

3. Weighted Average Cost Method

Inventory, March 31.........................................................$ 981,000

Cost of merchandise sold................................................ 10,921,500

Supporting computations

$11,902,500

136,500 units

Inventory:

11,250 units × $87.20 = $981,000

Cost of merchandise sold:

Beginning inventory, January 1..........................................$ 562,500

Purchases..................................................................... 11,340,000

Merchandise available for sale..........................................$11,902,500

Ending inventory, March 31............................................. 981,000

Cost of merchandise sold................................................ $10,921,500

4.Weighted

FIFO LIFO Average

Sales$19,875,000 $19,875,000 $19,875,000

Cost of merchandise sold 10,891,875 11,021,250 10,921,500

Gross profit $ 8,983,125 $ 8,853,750 $ 8,953,500

Inventory, March 31 $ 1,010,625 $ 881,250 $ 981,000

* ($1,687,500 + $562,500 + $225,000 + $4,320,000 + $4,080,000 + $4,800,000 + $4,200,000)

The units of an item available for sale during the year were as follows: Jan. 1 Inventory 12 units at $5,400 $ 64,800

The units of an item available for sale during the year were as follows:

Jan.  1 Inventory 12 units at $5,400 $ 64,800

Aug.  7 Purchase 18 units at $6,000 108,000

Dec. 11 Purchase 15 units at $6,480 97,200

Available for sale 45 units $270,000

There are 14 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost using (a) the first-in, first-out (FIFO) method; (b) the last-in, first-out (LIFO) method; and (c) the weighted average cost method.

Answer:

a. First-in, first-out (FIFO) method: $90,720 = 14 units × $6,480

b. Last-in, first-out (LIFO) method: $76,800 = [(12 units × $5,400) + (2 units × $6,000)]

c. Weighted average cost method: $84,000 (14 units × $6,000), where average cost = $6,000 = $270,000 ÷ 45 units

Beginning inventory, purchases, and sales for Item Gidget are as follows: Sept. 1 Inventory 80 units at $175

Beginning inventory, purchases, and sales for Item Gidget are as follows:

Sept. 1 Inventory 80 units at $175

10 Sale 65 units

18 Purchase 75 units at $180

27 Sale 70 units

Assuming a perpetual inventory system and using the last-in, first-out (LIFO) method, determine (a) the cost of merchandise sold on September 27 and (b) the inventory on September 30.

Answer:

a. Cost of merchandise sold (September 27): $12,600 = (70 units × $180) b. Inventory, September 30: 15 units @ $175 $2,625 5 units @ $180 900 20 $3,525

Beginning inventory, purchases, and sales for Item Widget are as follows: Mar. 1 Inventory 200 units at $8

Beginning inventory, purchases, and sales for Item Widget are as follows:

Mar.  1 Inventory 200 units at $8

 9 Sale 175 units

13 Purchase 160 units at 9

25 Sale 150 units

Assuming a perpetual inventory system and using the first-in, first-out (FIFO) method, determine (a) the cost of merchandise sold on March 25 and (b) the inventory on March 31.

Answer:

a. Cost of merchandise sold (March 25): 25 units @ $8 $ 200 125 units @ $9 1,125 150 $1,325 b. Inventory, March 31: $315 = 35 units × $9

Assume that the business in Exercise 7-5 maintains a perpetual inventory system, costing by the first-in, first-out method

Assume that the business in Exercise 7-5 maintains a perpetual inventory system, costing by the first-in, first-out method. Determine the cost of merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 3.

Answer:

Unit Total Unit Total Unit Total Quantity Cost Cost Quantity Cost Cost Quantity Cost Cost May 11,550 44 68,200 10 720 45 32,4001,550 44 68,200 720 45 32,400 121,200 44 52,800 350 44 15,400 720 45 32,400 14350 44 15,400 480 45 21,600 240 45 10,800 20 1,200 48 57,600240 45 10,800 1,200 48 57,600 31240 45 10,800 760 48 36,480 440 48 21,120

31  Balances137,08021,120

Assume that the business in Exercise 7-3 maintains a perpetual inventory system, costing by the last-in, first-out method

Assume that the business in Exercise 7-3 maintains a perpetual inventory system, costing by the last-in, first-out method. Determine the cost of merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 4.

Answer:

Unit Total Unit Total Unit Total Quantity Cost Cost Quantity Cost Cost Quantity Cost Cost Apr. 1120 26 3,120 1090 26 2,340 30 26 780 15 140 28 3,92030 26 780 140 28 3,920 20110 28 3,080 30 26 780 30 28 840 2430 28 840 20 26 520 10 26 260 30 160 30 4,80020 26 520 160 30 4,800 30  Balances6,5205,320