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    Chapter 6 Assignment Introductory Accounting Name: Nguyen Mai Phuong E6-5: (A) FIFO Method

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    Mai Phương Nguyễn
    The document contains sample accounting problems and solutions using different inventory cost flow methods (FIFO, LIFO, average cost). Problem E6-5 calculates ending inventory and cost of goods sold using the three methods for a company with 93 units purchased at different costs totaling $938. Problem E6-7 does the same for a company with 690 total units and $4,220 total cost. Problem P6-5A calculates ending inventory, cost of goods sold, gross profit, and gross profit rate for a company with 350 total units and $9,290 total cost, again using the three inventory methods.

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    Chapter 6 Assignment Introductory Accounting Name: Nguyen Mai Phuong E6-5: (A) FIFO Method

    Uploaded by

    Mai Phương Nguyễn
    51 views4 pages
    The document contains sample accounting problems and solutions using different inventory cost flow methods (FIFO, LIFO, average cost). Problem E6-5 calculates ending inventory and cost of goods sold using the three methods for a company with 93 units purchased at different costs totaling $938. Problem E6-7 does the same for a company with 690 total units and $4,220 total cost. Problem P6-5A calculates ending inventory, cost of goods sold, gross profit, and gross profit rate for a company with 350 total units and $9,290 total cost, again using the three inventory methods.

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    Accounting_6

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    The document contains sample accounting problems and solutions using different inventory cost flow methods (FIFO, LIFO, average cost). Problem E6-5 calculates ending inventory and cost of goods sold using the three methods for a company with 93 units purchased at different costs totaling $938. Problem E6-7 does the same for a company with 690 total units and $4,220 total cost. Problem P6-5A calculates ending inventory, cost of goods sold, gross profit, and gross profit rate for a company with 350 total units and $9,290 total cost, again using the three inventory methods.

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    Download as doc, pdf, or txt
    51 views4 pages

    Chapter 6 Assignment Introductory Accounting Name: Nguyen Mai Phuong E6-5: (A) FIFO Method

    Uploaded by

    Mai Phương Nguyễn
    The document contains sample accounting problems and solutions using different inventory cost flow methods (FIFO, LIFO, average cost). Problem E6-5 calculates ending inventory and cost of goods sold using the three methods for a company with 93 units purchased at different costs totaling $938. Problem E6-7 does the same for a company with 690 total units and $4,220 total cost. Problem P6-5A calculates ending inventory, cost of goods sold, gross profit, and gross profit rate for a company with 350 total units and $9,290 total cost, again using the three inventory methods.

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    © All Rights Reserved
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    Chapter 6 Assignment

    Introductory Accounting

    Name: Nguyen Mai Phuong

    E6-5:

    (a) FIFO method:

    Ending inventory = 19 × $11 = $209

    Cost of goods sold = $938 - $209 = $729

    (b) LIFO method:

    Ending inventory = 19 × $9 = $171

    Cost of goods sold = $938 - $171 = $767

    (c) Average-cost method:

    Average unit cost = $938 ÷ 93 = $10.086

    Ending inventory = $10.086 × 19 = $191,634

    Cost of goods sold = $938 - $191,634 = $746,366

    E6-7:

    Total units of goods available for sale = 120 + 370 + 200 = 690 (units)

    Total cost of goods available for sale = $4,220

    Units of ending inventory June 30th: 230 (units)

    Units of goods sold in June = 460 (units)

    (a)

    - FIFO method:

    + Ending inventory = 200 × 7$ + 30 × $6 = $1,580

    + Cost of goods sold = $4,220 - $1,580 = $2,640


    - LIFO method:

    + Ending inventory = 120 × $5 + 110 × $6 = $1,260

    + Cost of goods sold = $4,220 - $1,260 = $2,960

    - Average-cost method:

    + Average unit cost = $4,220 ÷ 690 = $6,116

    + Ending inventory = 230 × $6,116 = $1,406.667

    + Cost of goods sold = $4,220 - $1,406.667 = $2,813.333

    (b)

    - The FIFO method gives the highest ending inventory because it


    determines the flow of selling products by “first-in, first-out” rule. As
    in this period of rising price, if oldest goods are first to be sold, cost of
    goods sold will be at the lowest, therefore leads to highest ending
    inventory.

    - The LIFO method gives the highest cost of goods sold because it
    determines the flow of selling products by “last-in, first-out” rule. As
    in this period of rising price, if latest goods are first to be sold, cost of
    goods sold will be at the highest.

    (c) The average-cost value for ending inventory is somewhere in between


    ending inventory for FIFO and LIFO. The average-cost value for cost of
    goods sold is also somewhere in between cost of ending inventory for
    FIFO and LIFO. The reason for this is because average-cost method did
    not compute ending inventory and cost of good sold based on the price
    they were purchased and sold, but by devided total cost by total units.
    (d) The reason for not using $6 for average cost is because $6 is merely the
    average cost of purchased products; and if we do so, the number $6 does
    not exactly reflect the weighted average unit cost as it did not pay
    attention to the amount of goods available for sale. Therefore, we should
    divide the total cost of goods available for sale by total units to define the
    correct weighted average unit cost.

    P6 -5A:

    Total units of goods available for sale = 60 + 120 +100 + 70 = 350 (units)

    Total cost of goods available for sale = 60 × $24 + 120 × $26 + 100 × $27 + 70
    × $29 = $9,290

    Units of goods sold in October = 100 + 60 + 110 = 270 (units)

    Units of ending inventory October 29th = 350 – 270 = 80 (units)

    Sales Revenue for October = $10,300

    (a)

    - FIFO method:

    + Ending inventory = 70 × $29 + 10 × $27 = $2,300

    + Cost of goods sold = $9,290 - $2,300 = $6,990

    + Gross profit = $10,300 - $6,990 = $3,310

    + Gross profit rate = $3,310 ÷ $10,300 = 32.1%

    - LIFO method:

    + Ending inventory = 60 × $24 + 20 × $26 = $1,960

    + Cost of goods sold = $9,290 - $1,960 = $7,330

    + Gross profit = $10,300 - $7,330 = $2,970

    + Gross profit rate = $2,970 ÷ $10,300 = 28.8%


    - Average-cost method:

    + Average unit cost = $9,290 ÷ 350 = $26.543

    + Ending inventory = 80 × $26.543 = $2,123.429

    + Cost of goods sold = $9,290 - $2,123.429 = $7,166.571

    + Gross profit = $10,300 - $7,166.571 = $3,133.429

    + Gross profit rate = $3,133.429 ÷ $10,300 = 30.4%

    (b) Among the three cost flow assumptions, the FIFO method has the lowest
    cost of goods sold, highest ending inventory as well as gross profit and
    gross profit rate. Meanwhile, the LIFO method shows the highest cost of
    goods sold but lowest ending inventory as well as gross profit and gross
    profit rate. Finally, the average-cost values for cost of goods sold, ending
    inventory, gross profit and gross profit rate are all in between those of
    FIFO method and LIFO method.

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