ACC120 Lecture Notes - Lecture 6: Perpetual Inventory, Financial Statement, Weighted Arithmetic Mean

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greenmuskrat329

12 Mar 2019

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Determining ownership of goods: inventory cost determination methods. Cost formulas: fifo and average: financial statement effects. Valuing inventory at lower of cost and net realizable value. Determining inventory quantities: all companies count their inventory at least once a year. Must determine amount and value of inventory to prepare accurate financial statements: the determination of inventory quantities involves. Taking a physical inventory of goods on hand. Taking a physical inventory: involves counting, weighing, or measuring each kind of inventory, strong internal controls needed for an accurate inventory count: on hand inventory. Count done by employees not normally responsible for. Ensure all items are counted only once and nothing is missed (use pre-numbered tags) Determining ownership: only include inventory owned by company, goods in transit: On board a public carrier as at the count date. Look at fob point to determine if they should be included: consigned goods: Goods being sold that are owned by others.

Related Questions

Use the following information for the Exercisesbelow.

[The following information applies to the questionsdisplayed below.]

Laker Company reported the following January purchases and salesdata for its only product.

Date		Activities	Units Acquired at Cost								Units sold at Retail
Jan.	1	Beginning inventory	140	units	@	$	6.00	=	$	840
Jan.	10	Sales										100	units	@	$	15
Jan.	20	Purchase	60	units	@	$	5.00	=		300
Jan.	25	Sales										80	units	@	$	15
Jan.	30	Purchase	180	units	@	$	4.50	=		810
		Totals	380	units					$	1,950		180	units

The Company uses a perpetual inventory system. For specificidentification, ending inventory consists of 200 units, where 180are from the January 30 purchase, 5 are from the January 20purchase, and 15 are from beginning inventory.

Exercise 6-3 Perpetual: Inventory costing methods LO P1

Required:
1. Complete the table to determine the costassigned to ending inventory and cost of goods sold using specificidentification.
2. Determine the cost assigned to ending inventoryand to cost of goods sold using weighted average.
3. Determine the cost assigned to ending inventoryand to cost of goods sold using FIFO.
4. Determine the cost assigned to ending inventoryand to cost of goods sold using LIFO.

Required 3

Required 4

Complete the table to determine the cost assigned to endinginventory and cost of goods sold using specific identification.

Specific Identification
	Available for Sale			Cost of Goods Sold			Ending Inventory
Purchase Date	Activity	Units	Unit Cost	Units Sold	Unit Cost	COGS	Ending Inventory- Units	Cost Per Unit	Ending Inventory- Cost
Jan. 1	Beginning inventory	140
Jan. 20	Purchase	60
Jan. 30	Purchase	180
		380		0		$0	0		$0

Determine the cost assigned to ending inventory and to cost ofgoods sold using weighted average. (Round cost per unit to 2decimal places.)

Weighted Average - Perpetual:

Goods Purchased

Cost of Goods Sold

Inventory Balance

Date

# of units

Cost per unit

# of units sold

Cost per unit

Cost of Goods Sold

# of units

Cost per unit

Inventory Balance

January 1

140

$6.00

$840.00

January 10

January 20

Average cost

January 25

January 30

Totals

Determine the cost assigned to ending inventory and to cost ofgoods sold using FIFO.

Perpetual FIFO:

Goods Purchased

Cost of Goods Sold

Inventory Balance

Date

# of units

Cost per unit

# of units sold

Cost per unit

Cost of Goods Sold

# of units

Cost per unit

Inventory Balance

January 1

140

$6.00

$840.00

January 10

January 20

January 25

January 30

Totals

Determine the cost assigned to ending inventory and to cost ofgoods sold using LIFO.

Perpetual LIFO:

Goods Purchased

Cost of Goods Sold

Inventory Balance

Date

# of units

Cost per unit

# of units sold

Cost per unit

Cost of Goods Sold

# of units

Cost per unit

Inventory Balance

January 1

140

$6.00

$840.00

January 10

January 20

January 25

January 30

Totals

plumkoala693

E7-6 Analyzing and Interpreting the Financial Statement Effects of Periodic FIFO, LIFO, and Weighted Average Cost [LO 7-3]

Orion Iron Corp. tracks the number of units purchased and sold throughout each year but applies its inventory costing method at the end of the year, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31.

Transactions	Units		Unit Cost
a. Inventory, Beginning		350	$	14
For the year:
b. Purchase, April 11		950		12
c. Purchase, June 1		700		15
d. Sale, May 1 (sold for $42 per unit)		350
e. Sale, July 3 (sold for $42 per unit)		610
f. Operating expenses (excluding income tax expense), $18,000

Required:

1.	Calculate the number and cost of goods available for sale.

2.	Calculate the number of units in ending inventory.

3.	Compute the cost of ending inventory and cost of goods sold under (a) FIFO, (b) LIFO, and (c) weighted average cost. (Do not round intermediate calculations. Round your final answers to the nearest dollar amount.)

4.	Prepare an Income Statement that shows the FIFO method, LIFO method and weighted average method.

Which inventory costing method minimizes income taxes?

A.	FIFO
b.	LIFO
C.	Weighted Average Cost

chocolateelephant868

I accidentally did the chapter 6 serial problem instead of thisworksheet, and it is due today... Please, please, please, help. Iam a good 4.0 student that simply made an idiotic mistake. Thanksin advance for any help.

During January, acompany that uses a perpetual inventory system had beginninginventory, purchases, and sales as follows:
Units Unit cost

Beggininginventory 100 10

Jan 5purchased 40 12

Jan 10sold 60

Jan 15purchased 70 13

Jan 25sold 50

** The selling priceper unit is $20.

1. Using theperpetual inventory system, calculate thetotal cost of goods sold for January and cost of the company'sJanuary 31^st inventory for the followingmethods. Show all your work using the formatused in the text!

a) FIFO

b) LIFO

c) Weighted average

d) Prepare journal entries for the events listed in thequestion using the amounts calculated using in (a) FIFOmethod.

2. Using theperiodic inventory system, calculate the costof goods sold for January and cost of the company's January31^st inventory for the followingmethods. Show all your work usingthe format provided in the appendix of the chapter in thetext!

a) FIFO

b) LIFO

c) Weighted average

3. A company madethe following purchases during the year:

Jan 10: 15 units @360 each

Mar 25: 25 units@390 each

April 25: 10 units@ 420 each

July 30: 20 units @450 each

Oct 10: 15 units @480 each

On December 31,there were 28 units in ending inventory. These 28 units consistedof 1 from the January 10 purchase, 2 from the March 15 purchase, 5from the April 25 purchase, 15 from the July 30 purchase, and 5from the October 10 purchase. Using perpetual inventory system,calculate the cost goods sold and ending inventory for the yearusing the specific identification method.Show all your work using the format providedin the text! (Note: Answers do not differusing the periodic inventory system)

4. Monitor Companyuses the LIFO method for valuing its ending inventory. Thefollowing financial statement information is available for itsfirst year of operation:

Income Statement

For the year endedDec 31

Sales 50,0000

Cost of goodssold 23,000

Grossprofit 27,000

Expenses 13,000

Income beforetaxes 14,000

Monitor's endinginventory using the LIFO method was $8,200. Monitor's accountantdetermined that, had the company used FIFO, the ending inventorywould have been $8,500.

a) Determine what the income beforetaxes would have been, had Monitor used the FIFO method ofinventory valuation instead of LIFO.

b) Whatwould be the difference in income taxes between LIFO and FIFO,assuming a 30% tax rate?

c) IfMonitor wanted to lower the amount ofincome taxes to be paid, which method would itchoose?

periwinklehare745

ACC120 Lecture Notes - Lecture 6: Perpetual Inventory, Financial Statement, Weighted Arithmetic Mean

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