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Class Activity CH 6

1. The document presents inventory costing methods (FIFO, LIFO, average cost) applied to purchases and sales of iron during a period. 2. Under each method, the cost of goods sold and ending inventory amounts are calculated. 3. A comparison shows that FIFO results in the highest gross profit, while LIFO results in the lowest gross profit.

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79 views4 pages

Class Activity CH 6

1. The document presents inventory costing methods (FIFO, LIFO, average cost) applied to purchases and sales of iron during a period. 2. Under each method, the cost of goods sold and ending inventory amounts are calculated. 3. A comparison shows that FIFO results in the highest gross profit, while LIFO results in the lowest gross profit.

Uploaded by

Sana Batool
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

P 6-31A

Req. 1

FIFO most closely mimics the physical flow of Fit World’s


inventory.

Req. 2

Vitamins
LIFO
Purchases Cost of Goods Sold Inventory on Hand
Unit Total Unit Total Unit Total
Date Quantity Cost Cost Quantity Cost Cost Quantity Cost Cost
Beginning 80 $50 $4,000
80 50 4,000
Purchase 1
140 $55 $7,700 140 55 7,700
140 $55 $7,700 60 50 3,000
Sale 1
20 50 1,000
60 50 3,000
Purchase 2
160 60 9,600 160 60 9,600
160 60 9,600 50 50 2,500
Sale 2
10 50 500
Ending 300 $17,300 330 $18,800 50 $ 2,500

Req. 3

Journal Entry
POST.
DATE ACCOUNTS AND EXPLANATIONS REF. DEBIT CREDIT
Purchase 1 Inventory (140 x $55) 7,700
Accounts payable 7,700

Sale 1 Accounts receivable (160 × $100) 16,000


Sales revenue 16,000

Cost of goods sold(140 x $55) + 8,700


(20 x $50)
Inventory 8,700

Purchase 2 Inventory (160 x $60) 9,600


Accounts payable 9,600

Sale 2 Accounts receivable (170 × $110) 18,700


Sales revenue 18,700

Cost of goods sold(160 x $60) +


(10 x $50) 10,100
Inventory 10,100

Pay on Accounts payable 5,000


account Cash 5,000

Operating Operating expenses 3,300


expenses Cash ($3,300 × 2/3) 2,200
Accounts payable
($3,300 × 1/3) 1,100

P 6-32A
Req. 1
Fit World
Income Statement
Month Ended January 31, 2012
Sales revenue [(160 × $100) + (170 × $110)] $34,700
Cost of goods sold 18,800
Gross profit $15,900
Operating expenses 3,300
Net income $ 12,600
(20-25 min) P 6-33A
Req. 1

Iron
FIFO
Purchases Cost of Goods Sold Inventory on Hand
Unit Total Unit Total Unit Total
Date Quantity Cost Cost Quantity Cost Cost Quantity Cost Cost
Beg. 55 $35 $1,925
Aug. 3 45 $35 $1,575 10 35 350
10 35 350
Aug. 8
75 $52 $3,900 75 52 3,900
10 35 350
Aug. 21
60 52 3,120 15 52 780
15 52 780
Aug. 30
10 55 550 10 55 550
Totals 85 $4,450 115 $5,045 25 $1,330

Req. 2
Iron
LIFO
Purchases Cost of Goods Sold Inventory on Hand
Unit Total Unit Total Unit Total
Date Quantity Cost Cost Quantity Cost Cost Quantity Cost Cost
Beg. 55 $35 $1,925
Aug. 3 45 $35 $1,575 10 35 350
10 35 350
Aug. 8
75 $52 $3,900 75 $52 $3,900
70 52 3,640 10 35 350
Aug. 21
5 52 260
10 35 350
Aug. 30 5 52 260
10 55 550 10 55 550
Totals 85 $4,450 115 $5,215 25 $1,160

Req. 3
Iron
Average Cost
Purchases Cost of Goods Sold Inventory on Hand
Unit Total Unit Total Unit Total
Date Quantity Cost Cost Quantity Cost Cost Quantity Cost Cost
Beg. 55 $35 $1,925
Aug. 3 45 $35 $1,575 10 35 350
Aug. 8 75 $52 $3,900 0 85 50 4,250
Aug. 21 70 50 3,500 15 50 750
Aug. 30 10 55 550 25 52 1,300
Totals 85 $4,450 115 $5,075 25 $1,300

Req. 4
FIFO LIFO Average
Cost of goods sold: $5,045 $5,215 $5,075

Req. 5
Sales - Cost of goods sold = Gross profit
FIFO $9,685 - $5,045 = $4,640
LIFO $9,685 - $5,215 = $4,470
Average $9,685 - $5,075 = $4,610

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