Quick Study 6-1

FIFO
Date

Goods Purchased

1/ 1
1/ 9

85 @ $6.40

1/25

110 @ $6.60

1/26

Cost of Goods Sold

320 @ $6.00 = $1,920

40 @ $6.40 =
256
360
$2,176

Alternate solution format

FIFO:
110 @ $6.60 =
45 @ $6.40 =
155

$ 726
288
$1,014

Inventory Balance

320 @ $6.00
320 @ $6.00
85 @ $6.40
320 @ $6.00
85 @ $6.40
110 @ $6.60
45 @ $6.40
110 @ $6.60

= $1,920
= $2,464
= $3,190
= $1,014

Ending inventory cost

Quick Study 6-2

LIFO
Date

Goods Purchased

1/ 1
1/ 9

85 @ $6.40

1/25

110 @ $6.60

1/26

Cost of Goods Sold

110 @ $6.60 = $ 726

85 @ $6.40 =
544
165 @ $6.00 =
990
360
$2,260

Alternate solution format

LIFO:
155 @ $6.00 =

$ 930

Inventory Balance

320 @ $6.00
320 @ $6.00
85 @ $6.40
320 @ $6.00
85 @ $6.40
110 @ $6.60
155 @ $6.00

= $1,920
= $2,464
= $3,190
= $ 930

Ending inventory cost

Quick Study 6-3

Weighted Average
Date

1/ 1
1/ 9

Goods Purchased

85 @ $6.40

Cost of Goods Sold

Inventory Balance

320 @ $6.00
320 @ $6.00
85 @ $6.40

= $1,920
= $2,464

(avg. cost is $6.084*)

1/25

110 @ $6.60

320 @ $6.00
85 @ $6.40
110 @ $6.60

= $3,190

(avg. cost is $6.194*)

360 @ $6.194 = $2,230*

1/26

155 @ $6.194

= $ 960*

*rounded

Alternate solution format

Weighted average:
320 @ $6.00 =
85 @ $6.40 =
110 @ $6.60 =
515

$1,920
544
726
$3,190

Cost of goods available for sale

$3,190/515 = $6.194 (rounded) weighted average cost per unit

155 units @ $6.194 =

$ 960 Ending inventory cost (rounded)

Exercise 6-5
a. FIFO Perpetual
Date

Goods Purchased

Cost of Goods Sold

1/1

100 @ $10

1/10
3/14

90 @ $10 = $ 900
250 @ $15 = $ 3,750

3/15

7/30

10 @ $10
130 @ $15 = $2,050
400 @ $20 = $ 8,000

10/5

10/26

Inventory Balance

120 @ $15
180 @ $20 = $5,400
600 @ $25 = $15,000
_____
$8,350

10 @ $10

= $ 1,000
=$

10 @ $10
250 @ $15

= $ 3,850

120 @ $15

= $ 1,800

120 @ $15
400 @ $20

= $ 9,800

220 @ $20

= $ 4,400

220 @ $20
600 @ $25

= $19,400

b. LIFO Perpetual
Date

Goods Purchased

Cost of Goods Sold

100

Inventory Balance

1/1

100 @ $10

1/10
3/14

90 @ $10 = $ 900
250 @ $15 = $ 3,750

3/15
140 @ $15 = $2,100
7/30

400 @ $20 = $ 8,000

10/5
300 @ $20 = $6,000

10/26

600 @ $25 = $15,000

_____
$9,000

10 @ $10

= $ 1,000
= $

100

10 @ $10
250 @ $15

= $ 3,850

10 @ $10
110 @ $15

= $ 1,750

10 @ $10
110 @ $15
400 @ $20

= $ 9,750

10 @ $10
110 @ $15
100 @ $20

= $ 3,750

10 @ $10
110 @ $15
100 @ $20
600 @ $25

= $ 18,750

Alternate Solution Format

Ending
Inventory
a. FIFO:
(600 x $25) + (220 x $20) .....................................................
(90 x $10) + (10 x $10) + (130 x $15) +
(120 x $15)+ (180 x $20) ......................................................
b. LIFO:
(10 x $10) + (110 x $15) + (100 x $20) + (600 x $25) .........
(90 x $10) + (140 x $15) + (300 x $20) .................................

Cost of
Goods Sold

$19,400
$8,350
$18,750
$9,000

FIFO Gross Margin

Sales Revenue (530 units sold x $40 selling price) ..............
Less: FIFO cost of goods sold ...............................................
Gross margin ............................................................................

$21,200
8,350
$12,850

LIFO Gross Margin

Sales Revenue (530 units sold x $40 selling price) ..............
Less: LIFO cost of goods sold ...............................................
Gross margin .............................................................................

$21,200
9,000
$12,200

Exercise 6-6
a. Specific identification methodCost of goods sold
Cost of goods available for sale .....................................
Ending inventory under specific identification
3/14 purchase (100 @ $15) ...................................... $ 1,500
7/30 purchase (120 @ $20) .......................................
2,400
10/26 purchase (600 @ $25) ....................................... 15,000
Total ending inventory under specific identification ..
Cost of goods sold under specific identification .......

$27,750

18,900
$ 8,850

b. Specific identification methodGross margin

Sales Revenue (530 units sold x $40 selling price) ......
Less: Specific identification cost of goods sold .........
Gross margin....................................................................

$21,200
8,850
$12,350

Problem 6-2B
1. Calculate cost of goods available for sale and units available for sale:
Beginning inventory .......................
Jan. 10..............................................
Feb. 13 .............................................
July 21..............................................

600 units @ $55 =

$ 33,000

450 units @ $56 =

200 units @ $57 =
230 units @ $58 =

25,200
11,400
13,340

Aug. 5 ..............................................
Units available ................................
Cost of goods available for sale ...

345 units @ $59 =

1,825 units

20,355
$103,295

2. Units in ending inventory:

Units available (from part 1) ...........

1,825

Less: Units sold (given) ..................

765

Ending Inventory .............................

1,060

Problem 6-2B (Continued)

3a. FIFO perpetual
Date

Goods Purchased

Cost of Goods Sold

1/1

Inventory Balance
600 @ $55

= $33,000
= $58,200

1/10

450 @ $56 = $25,200

600 @ $55
450 @ $56

2/13

200 @ $57 = $11,400

600 @ $55
450 @ $56
200 @ $57

= $69,600

170 @ $55
450 @ $56
200 @ $57

= $45,950

2/15

7/21

8/5

430 @ $55 = $23,650

230 @ $58 = $13,340

170 @ $55
450 @ $56
200 @ $57
230 @ $58

345 @ $59 = $20,355

8/10

170 @ $55
450 @ $56
200 @ $57
230 @ $58
345 @ $59
170 @ $55
165 @ $56 = $18,590
______
$42,240

Alternate FIFO solution format

Cost of goods available for sale .........................
Less: Cost of Goods Sold
430 @ $55 ......................................
170 @ 55 ......................................
165 @ 56 ......................................
765
Total cost of goods sold ......................................
Ending Inventory ..................................................

285 @ $56
200 @ $57
230 @ $58
345 @ $59

$103,295
$23,650
9,350
9,240
42,240
$ 61,055

Proof of Ending Inventory

Ending Inventory

285 @ $56
200 @ 57
230 @ 58
345 @ 59
1,060 units

$ 15,960
11,400
13,340
20,355
$ 61,055

= $59,290

= $79,645

= $61,055

Problem 6-2B (Continued)

3b. LIFO perpetual
Date

Goods Purchased

Cost of Goods Sold

1/1
1/10

2/13

450 @ $56 = $25,200

200 @ $57 = $11,400

2/15

7/21

8/5

200 @ $57
230 @ $56 = $24,280
230 @ $58 = $13,340

345 @ $59 = $20,355

8/10

Inventory Balance
600 @ $55

= $33,000

600 @ $55
450 @ $56

= $58,200

600 @ $55
450 @ $56
200 @ $57

= $69,600

600 @ $55
220 @ $56

= $45,320

600 @ $55
220 @ $56
230 @ $58

= $58,660

600 @ $55
220 @ $56
230 @ $58
345 @ $59
335 @ $59 = $19,765

______
$44,045

Alternate LIFO solution format

Cost of goods available for sale .........................
Less: Cost of Goods Sold
200 @ $57 ......................................
230 @ 56 ......................................
335 @ 59 ......................................
765
Cost of Goods Sold ..............................................
Ending Inventory ..................................................

600 @ $55
220 @ $56
230 @ $58
10 @ $59

$103,295
$11,400
12,880
19,765
44,045
$ 59,250

Proof of Ending Inventory

Ending inventory ..............

600 @ $55
220 @ 56
230 @ 58
10 @ 59
1,060 units

$ 33,000
12,320
13,340
590
$ 59,250

= $79,015

= $59,250

Problem 6-2B (Continued)

3c. Specific Identification
Cost of goods available for sale ......
Less: Cost of Goods Sold
600 @ $55 ..........................
165 @ $57 ..........................
765 ....................................
Cost of Goods Sold ...........................
Ending inventory ...............................

$103,295
$33,000
9,405
42,405
$ 60,890

Proof of Ending Inventory

450 @ $56
35 @ 57
230 @ 58
345 @ 59
Ending inventory ................. 1,060 Units

$25,200
1,995
13,340
20,355
$60,890

3d. Weighted Average

Date

Goods Purchased

Cost of Goods Sold

1/1
1/10

Inventory Balance
600 @ $55.00

450 @ $56 = $25,200

= $33,000

600 @ $55.00
450 @ $56.00

= $58,200

(avg. cost is $55.43*)

2/13

200 @ $57 = $11,400

600 @ $55.00
450 @ $56.00
200 @ $57.00

= $69,600

(avg. cost is $55.68)

2/15
7/21

430@ $55.68 = $23,942**

230 @ $58 = $13,340

820 @ $55.68

= $45,658**

820 @ $55.68
230 @ $58.00

= $58,998**

(avg. cost is $56.19*)

8/5

345 @ $59 = $20,355

820 @ $55.68
230 @ $58.00
345 @ $59.00

= $79,353**

(avg. cost is $56.88*)

8/10

335@ $56.88 = $19,055**

$42,997

1,060@ $56.88

= $60,293**

* rounded to nearest cent

** rounded to nearest dollar
Note: Total cost of goods sold plus ending inventory = $42,997 + $60,293 = $103,290. The
$5 difference from the cost of goods available for sale of $103,295 is due to rounding.

Problem 6-2B (Concluded)

4.
Specific
Identification

Weighted
Average

$68,850

$68,850

44,045

42,405

42,997

$26,610 $24,805

$26,445

$25,853

FIFO

Sales (765 x $90) ....................

Less: Cost of goods sold .....
Gross profit ............................

LIFO

$68,850 $68,850
42,240

5. The manager of Venus Company likely will prefer the FIFO method
because it would yield the largest gross profit. This would give the
manager his/her highest bonus based on gross profit.