Step by Step Assistance

Friday, 11 October 2013

A physical inventory of Helmke Company taken at December 31 reveals the following. Per Unit Item Units Cost Market Audio equipment Receivers 335 $ 90 $ 98 CD players 250 111 100 MP3 players 316 86 95 Speakers 194 52 41 Video equipment Handheld LCDs 470 150 125 VCRs 281 93 84 Camcorders 202 310 322 Car audio equipment Satellite radios 175 70 84 CD/MP3 radios 160 97 105 Required: 1. Calculate the lower of cost or market for the inventory applied separately to each item.

A physical inventory of Helmke Company taken at December 31 reveals the following.

    Per Unit
   
  Item Units Cost Market
   Audio equipment          
       Receivers 335     $ 90    $ 98   
       CD players 250       111      100   
       MP3 players 316       86      95   
       Speakers 194       52      41   
  Video equipment          
       Handheld LCDs 470       150      125   
       VCRs 281       93      84   
       Camcorders 202       310      322   
  Car audio equipment          
       Satellite radios 175       70      84   
       CD/MP3 radios 160       97      105   


Required:
1.
Calculate the lower of cost or market for the inventory applied separately to each item.

Explanation:
1.
    Per Unit              
   
             
  Item Units Cost Market Total
Cost
Total
Market
LCM applied
to Items
 
  Audio equipment                        
     Receivers 335    $ 90     $ 98     $ 30,150   $ 32,830   $ 30,150     
     CD players 250      111       100       27,750     25,000     25,000     
     MP3 players 316      86       95       27,176     30,020     27,176     
     Speakers 194      52       41       10,088     7,954     7,954     
  Video equipment                        
     Handheld LCDs 470      150       125       70,500     58,750     58,750     
     VCRs 281      93       84       26,133     23,604     23,604     
     Camcorders 202      310       322       62,620     65,044     62,620     
  Car audio equipment                        
     Satellite radios 175      70       84       12,250     14,700     12,250     
     CD/MP3 radios 160      97       105       15,520     16,800     15,520     
           

   

 
  Total           $ 282,187       $ 263,024     
           



   



 


Lower of cost or market for inventory applied separately = $263,024

2.
To adjust inventory cost to market.
$19,163 = $282,187 − $263,024
 

Anthony Company uses a perpetual inventory system. It entered into the following purchases and sales transactions for March. Date Activities Units Acquired at Cost Units Sold at Retail Mar. 1 Beginning inventory 60 units @ $50.20/unit Mar. 5 Purchase 205 units @ $55.20/unit Mar. 9 Sales 220 units @ $85.20/unit Mar. 18 Purchase 65 units @ $60.20/unit Mar. 25 Purchase 110 units @ $62.20/unit Mar. 29 Sales 90 units @ $95.20/unit Totals 440 units 310 units

Anthony Company uses a perpetual inventory system. It entered into the following purchases and sales transactions for March.

  Date Activities Units Acquired at Cost Units Sold at Retail
  Mar. 1   Beginning inventory   60  units  @ $50.20/unit        
  Mar. 5   Purchase   205  units  @ $55.20/unit        
  Mar. 9   Sales           220  units @ $85.20/unit
  Mar. 18   Purchase   65  units  @ $60.20/unit        
  Mar. 25   Purchase   110  units  @ $62.20/unit        
  Mar. 29   Sales           90  units @ $95.20/unit
           

   

 
          Totals   440  units     310  units  
           



   



 

Required:

Compute cost of goods available for sale and the number of units available for sale.
 
Explanation:
 
  Beginning inventory 60  units  @ $50.20 $ 3,012  
  March  5 205  units  @ $55.20   11,316  
  March 18 65  units  @ $60.20   3,913  
  March 25 110  units  @ $62.20   6,842  
 

 

  Units available 440  units      
 



     
  Cost of goods available for sale       $ 25,083  

 2. Compute the number of units in ending inventory.
 
Explanation:
 
  Units available (from part 1) 440  units
  Less: Units sold (220 + 90) 310  units
 

  Ending Inventory (units) 130  units


Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification. For specific identification, the March 9 sale consisted of 45 units from beginning inventory and 175 units from the March 5 purchase; the March 29 sale consisted of 25 units from the March 18 purchase and 65 units from the March 25 purchase. (Round your per unit costs to 2 decimal places)
 
Explanation:
(a) FIFO perpetual
  Date Goods Purchased Cost of Goods Sold Inventory Balance
  Mar. 1                       60  @ $50.20 = $ 3,012   
  Mar. 5   205  @ $55.20 = $ 11,316              60  @ $50.20      
                            205  @ $55.20 = $ 14,328   
  Mar. 9             60  @ $50.20 = $ 3,012    45  @ $55.20 = $ 2,484   
                  160  @ $55.20 = $ 8,832             
  Mar. 18   65  @ $60.20 = $ 3,913             45  @ $55.20      
                            65  @ $60.20 = $ 3,913   
  Mar. 25   110  @ $62.20 = $ 6,842             45  @ $55.20      
                            65  @ $60.20      
                            110  @ $62.20 = $ 13,239   
  Mar. 29             45  @ $55.20 = $ 2,484    20  @ $60.20      
                  45  @ $60.20 = $ 2,709    110  @ $62.20 = $ 8,046   
                        

     



                        $ 17,037             
                          



         

   
(b) LIFO perpetual
  Date Goods Purchased Cost of Goods Sold Inventory Balance
  Mar. 1                       60  @ $50.20 = $ 3,012   
  Mar. 5   205  @ $55.20 = $ 11,316              60  @ $50.20      
                            205  @ $50.20 = $ 14,328   
  Mar. 9             205  @ $55.20 = $ 11,316    45  @ $50.20 = $ 2,259   
                  15  @ $50.20 = $ 753             
  Mar. 18   65  @ $60.20 = $ 3,913              45  @ $50.20      
                            65  @ $60.20 = $ 6,172   
  Mar. 25   110  @ $62.20 = $ 6,842              45  @ $50.20      
                            65  @ $60.20      
                            110  @ $62.20 = $ 13,014   
                            45  @ $50.20      
  Mar. 29             90  @ $62.20 = $ 5,598    65  @ $60.20      
                         

20  @ $62.20 = $ 7,416   
                         $ 17,667         



                          



         

 
(c) Weighted Average perpetual
  Date Goods Purchased Cost of Goods Sold Inventory Balance
  Mar. 1                       60  @ $50.20 = $ 3,012   
  Mar. 5   205  @ $55.20 = $ 11,316             60  @ $50.20      
                            205  @ $55.20 = $ 14,328   
                            (avg. = $54.07)      
  Mar. 9             220  @ $54.07 = $ 11,895    45  @ $54.07 = $ 2,433   
                            (avg. = $54.07)      
  Mar. 18   65  @ $60.20 = $ 3,913             45  @ $54.07      
                            65  @ $60.20 = $ 6,346   
                            (avg. = $57.69)      
  Mar. 25   110  @ $62.20 = $ 6,842             45  @ $54.07      
                            65  @ $60.20      
                            110  @ $62.20 = $ 13,188   
                            (avg. = $59.94)      
  Mar. 29             90  @ $59.94 = $ 5,395    130  @ $59.94 = $ 7,793   
                        

     



                        $ 17,290             
                        



         

 
(d) Specific Identification
  Date Goods Purchased Cost of Goods Sold Inventory Balance
  Mar. 1                       60  @ $50.20 = $ 3,012   
  Mar. 5   205  @ $55.20 = $ 11,316              60  @ $50.20      
                            205  @ $55.20 = $ 14,328   
  Mar. 9             45  @ $50.20 = $ 2,259    15  @ $50.20      
                  175  @ $55.20 = $ 9,660    30  @ $55.20 = $ 2,409   
  Mar. 18   65  @ $60.20 = $ 3,913              15  @ $50.20      
                            30  @ $55.20      
                            65  @ $60.20 = $ 6,322   
  Mar. 25   110  @ $62.20 = $ 6,842              15  @ $50.20      
                            30  @ $55.20      
                            65  @ $60.20      
                            110  @ $62.20 = $ 13,164   
  Mar. 29             25  @ $60.20 = $ 1,505    15  @ $50.20      
                  65  @ $62.20 = $ 4,043    30  @ $55.20      
                        

40  @ $60.20      
                        $ 17,467    45  @ $62.20 = $ 7,616   
                        



     




Compute gross profit earned by the company for each of the four costing methods. For specific identification, the March 9 sale consisted of 45 units from beginning inventory and 175 units from the March 5 purchase; the March 29 sale consisted of 25 units from the March 18 purchase and 65 units from the March 25 purchase. (Round your per unit costs to 2 decimal places and inventory balances.)