SOLUTIONS TO PROBLEM SET A

35 Minutes, Medium PROBLEM 8.1A

SPORTS WORLD
a.
General Journal

2015
(1) Specific identification method:

Jan 15 Cost of Goods Sold 30,500

Inventory 30,500
To record cost of 1,000 Ace-5 reels sold to Angler's
Warehouse: 500 units @ $29; 500 units @ $32.

(2) Average-cost method:

Jan 15 Cost of Goods Sold 30,800

Inventory 30,800
To record cost of 1,000 Ace-5 reels sold to Angler's
Warehouse by the average-cost method: 1,000
units @ $30.80 ($46,200 total cost, divided by 1,500
units).
 (3) First-in, First-out (FIFO) method:

Jan 15 Cost of Goods Sold 30,200

Inventory 30,200
To record cost of 1,000 Ace-5 reels sold to Angler's
Warehouse. Cost determined by the FIFO flow
assumption: 600 units @ $29, plus 400 units
@ $32 = $30,200.

(4) Last-in, First-out (LIFO) method:

Jan 15 Cost of Goods Sold 31,700

Inventory 31,700
To record cost of 1,000 Ace-5 reels sold to Angler's
Warehouse. Cost determined by the LIFO flow
assumption: 900 units @ $32, plus 100 units
@ $29 = $31,700.

b. Inventory subsidiary ledger records: PROBLEM 8.1A

(1) Specific identification method: SPORTS WORLD (continued)
PURCHASED SOLD BALANCE
Cost of
Date Units Unit Cost Total Units Unit Cost Goods Sold Units Unit Cost Balance
Dec 12 600 $ 29 $ 17,400 600 $ 29 $ 17,400
Jan 09 900 32 $ 28,800 600 29
900 32 46,200
Jan 15 500 $ 29 100 29
500 32 $ 30,500 400 32 15,700
(2) Average-cost method:
PURCHASED SOLD BALANCE
Cost of
Date Units Cost Total Units Cost Goods Sold Units Cost Balance
Dec 12 600 $ 29 $ 17,400 600 $ 29.00 $ 17,400
Jan 09 900 32 28,800 1,500 30.80 46,200
Jan 15 1,000 $ 30.80 $ 30,800 500 30.80 15,400
* $46,200 total cost ÷ 1,500 units = $30.80 average unit cost.
(3) First-in, first-out (FIFO) method:
PURCHASED SOLD BALANCE
Cost of
Date Units Unit Cost Total Units Unit Cost Goods Sold Units Unit Cost Balance
Dec 12 600 $ 29 $ 17,400 600 $ 29 $ 17,400
Jan 09 900 32 28,800 600 29
900 32 46,200
Jan 15 600 $ 29
400 32 $ 30,200 500 32 16,000

(4) Last-in, first-out (LIFO) method:

PURCHASED SOLD BALANCE
Cost of
Date Units Unit Cost Total Units Unit Cost Goods Sold Units Unit Cost Balance
Dec 12 600 $ 29 $ 17,400 600 $ 29 $ 17,400
Jan 09 900 32 $ 28,800 600 29
900 32 46,200
Jan 15 900 $ 32
100 29 $ 31,700 500 29 14,500

PROBLEM 8.1A
SPORTS WORLD (concluded)
c. No. As shown in part a , the LIFO method resulted in the highest cost of goods sold figure, whereas
the FIFO method resulted in the lowest. If the LIFO method is used for tax purposes, income tax
regulations require that it also be used for financial reporting purposes.