Assignment
PROBLEM 6-3 (page 277 in Fundamental Accounting Principles, 22 ed.)
Montoure Company uses a perpetual inventory system. It entered into the following calendar-year 2015 purchases and sales transactions. (For specific identification, units sold consist of 600 units from beginning inventory, 300 from the February 10 purchase, 200 from the March 13 purchase, 50 from the August 21 purchase, and 250 from the September 5 purchase.)
Date Activities Units Acquired at Cost Units Sold at Retail
Jan. 1 Beginning inventory 600 units @ $45.00 per unit
Feb. 10 Purchase 400 units @ $42.00 per unit
Mar. 13 Purchase 200 units @ $27.00 per unit
Mar. 15 Sales 800 units @ $75.00 per unit
Aug. 21 Purchase 100 units @ $50.00 per unit
Sept. 5 Purchase 500 units @ $46.00 per unit
Sept. 10 Sales 600 units @ $75.00 per unit
Totals 1,800 units 1,400 units
Required:
1. Compute cost of goods available for sale and the number of units available for sale.
2. Compute the number of units in ending inventory.
3. Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification. (Round all amounts to cents.)
4. Compute gross profit earned by the company for each of the four costing methods in part 3.
5. If the company's manager earns a bonus based on a percent of gross profit, which method of inventory costing will the manager likely prefer?
PROBLEM 6-9 (page 279 in Fundamental Accounting Principles, 22 ed.)
The records of Alaska Company provide the following information for the year ended December 31.
At Cost At Retail
January 1 beginning inventory $ 469,010 $ 928,950
Cost of goods purchased 3,376,050 6,381,050
Sales 5,595,800
Sales returns 42,800
Required:
1. Use the retail inventory method to estimate the company's year-end inventory at cost.
2. A year-end physical inventory at retail prices yields a total inventory of $1,686,900. Prepare a calculation showing the company's loss from shrinkage at cost and at retail.
PROBLEM 6-10 (page 279 in Fundamental Accounting Principles, 22 ed.)
Wayward Company wants to prepare interim financial statements for the first quarter. The company wishes to avoid making a physical count of inventory. Wayward's gross profit rate averages 34%. The following information for the first quarter is available from its records.
January 1 beginning inventory $ 302,580
Cost of goods purchased 941,040
Sales 1,211,160
Sales returns 8,410
Required
Use the gross profit method to estimate the company's first quarter ending inventory.