Chapter 15
Calculations and Applications
Do calculations on scrap paper as needed. Worked-out solutions are provided at end.
1. From the following calculate by the weighted-average method (a) the cost of ending
inventory, and (b) the cost of goods sold. Ending inventory shows 18 units.
Number Purchased Cost
for resale
per unit Total
January 1 inventory 12
$2
$24
March 1
9
$3
$27
April 1
20
$4
$80
November 1
15
$5
$75
2. Rework No. 1 using the FIFO assumption.
3. Rework No. 1 using the LIFO assumption.
4. Bill's Dress Shop's inventory at cost on January 1 was $32,500. Its retail value is
$50,000. During the year, Bill purchased additional merchandise at a cost of $170,000
with a retail value of $366,000. The net sales at retail for the year were $345,000.
Calculate Bill's inventory at cost by the retail method. Round the cost ratio to the nearest
whole percent.
5. On January 1, Font Company had inventory costing $65,000 and during January had net
purchases of $118,000. Over recent years, Font's gross profit has averaged 45% on
sales. Given that the company has net sales of $190,000, calculate the estimated cost of
ending inventory using the gross profit method.
Calculations/Applications:
1.
a. $66.24
b. $139.76
2.
a. $87
b. $119
3.
a. $42
b. $164
4. $34,790
5. $78,500
Worked-Out Solutions
1.
$24 + $27 + $80 + $75 =
$206
56
= $3.68
18 × $3.68 = $66.24 cost of ending inventory
$206- $66.24 = $139.76 cost of goods sold
2.
15 × $5 = $75
3 × $4 = 12
$87 cost of ending inventory
$206 - $87 = $119 cost of goods sold
3.
12 × $2 = $24
6 × $3 = 18
$42 cost of ending inventory
$206 - $42 = $164 cost of goods sold
4.
Cost
Beginning inventory
Purchases
Cost of goods available for sale
Less net sales for the year
Ending inventory at retail
Cost ratio
$202,500
$416,000
= 49%
Ending inventory at cost
$ 32,500
170,000
$202,500
Retail
$ 50,000
366,000
$416,000
345,000
$ 71,000
49%
$ 34,790
5.
Cost
Inventory, January 1
Net purchases
Cost of goods available for sale
Less net sales for the year
Less: Estimated cost of goods sold:
Net sales at retail
Cost percentage (100% -45%)
Estimated cost of goods sold
Estimated inventory, January 31
Retail
$ 65,000
118.000
$183,000
$190,000
.55
$104,500
$ 78,500