SOLUTIONS TO EXERCISES - SERIES B - CHAPTER 5 WORKING PAPERS
Harris Co.
First Purchase
Second Purchase
Total
(a)
FIFO
Cost of Goods Sold
Ending Inventory
5-51
(b)
LIFO
(c)
W. AVG.
Marley Company
Inventory Purchases
Beginning Inventory
First Purchase
Second Purchase
Goods Available for Sale
@
@
@
=
=
=
a. Cost of Goods Sold:
FIFO
Cost
per Unit
Units
@
@
@
Total
Ending Inventory =
EXERCISE 5-3B (cont.)
5-52
Cost of
Goods
Sold
=
=
=
b. Cost of Goods Sold:
LIFO
Cost
per Unit
Units
@
@
@
Cost of
Goods
Sold
=
=
=
Total
Ending Inventory =
c.
Weighted Average:


Cost of Goods Sold
Ending Inventory
=
=
@
@
5-53
Cost per Unit
=
=
a. (1)
FIFO
Stanley Company
a. (2)
LIFO
5-54
EXERCISE 5-4B (cont.)
a. (3)
Weighted Average
FIFO
Cash Flows From Operating Activities:
5-55
LIFO
W. Avg.
The Shirt Shop
Summary of Purchase Transactions
1/18
4/15
7/21
9/5
Purchased Units
Purchased Units
Purchased Units
Purchased Units
300
400
220
60
@
@
@
@
$7
$12
$14
$18
=
=
=
=
$2,100
$4,800
$3,080
$1,080
Available for Sale
a. (1)
FIFO
Units
Unit
Cost
Ending Inventory
EXERCISE 5-5B (cont.)
5-56
Total
a. (2)
LIFO
Units
Unit
Cost
Total
Ending Inventory
a. (3)
Weighted Average


=
=
Ending Inventory
5-57
Cost per Unit
EXERCISE 5-5B (cont.)
FIFO
LIFO
5-58
EXERCISE 5-6B a. (cont.)
5-59
Steelman Company
Income Statements
FIFO
=
=
=
LIFO
EXERCISE 5-6B (cont.)
5-60
b.
c.
Steelman Company
Cash Flows from Operating Activities
FIFO
d.
5-61
LIFO
5-62
EXERCISE 5-7B a. (cont.)
Home Gifts Inc.
Effect of Events on Financial Statements
Panel 1: FIFO Cost Flow
Event
1.
2.
3.
4.
5.
Bal.
Cash
+
+
+
+
+
+
23,300 +
Inv.
= C. Stk. + Ret. Ear.
=
=
=
=
=
10,000 =
NA
+
+
+
+
+
+
33,300
Rev.






112,500 
Exp.
= Net Inc.
=
=
=
=
=
79,200 =
33,300
Cash Flows
23,300
NC
Panel 2: LIFO Cost Flow
Event
1.
2.
3.
4.
5.
Bal.
Cash
+
+
+
+
+
+
23,700 +
Inv.
= C. Stk + Ret. Ear.
=
=
=
=
=
9,000 =
NA
+
+
+
+
+
+
32,700
Rev.






112,500 
5-63
Exp.
=
=
=
=
=
=
79,800 =
Net Inc.
32,700
Cash Flows
23,700
NC
5-64
EXERCISE 5-7B (cont.)
b.
c.
d.
e.
5-65
a.
Duncan Steel Company
Effect of Events on Financial Statements
Event
1/1
4/1a
4/1b
8/1
12/1a
12/1b
Bal.
Cash
+
+
+
+
+
+
+
+
Inv.
=
Ret. Ear.
Rev.








=
=
=
=
=
=
=
b.
5-66
Exp.
=
=
=
=
=
=
=
=
Net Inc.
Cash Flows
a.
Nash Auto Parts, Inc.
Date
Purchased
Units Cost
Total
Sold
Units Cost
Total
Inventory Balance
Units Cost
Total
=
=
=
=
=
=
=
Ending Inventory:
b.
5-67
a.
a.
b.
c.
Cost Per
Item Quantity
Unit
M
N
O
P
200
100
40
30
$10
12
8
5
James Hardware
d.
e.
Mkt. Val.
per Unit
Total
Cost
f.
Total
Market
$8
10
9
10
(1) Ending inventory using the individual item method:
(2) Ending inventory using the aggregate method:
b.
1.
Adjustment using the individual item method:
2.
Adjustment using the aggregate method:
5-68
g.
Ind. Item
Lower
Cost/Mkt.
a.
a.
b.
Item
Quantity
A
B
C
400
500
300
c.
Cost
Per
Unit
$20
25
10
d.
e.
Mkt. Value Unit Lower
Per Unit
Cost/Mkt.
$18
24
12
Totals
b.
Adjustment =
5-69
f.
Total
Cost
g.
Total Lower
Cost/Mkt.
a. Gross Margin:
b. Cost of Goods Sold:
c. Computation of Ending Inventory:
d. Inventory shortage:
e. Explanation:
5-70
5-71
a.
Discount Ski
$800,000
Sales
Cost of Goods Sold
Gross Margin
Gross Margin Percentage
Aspen Sports
$200,000
$300,000
20%
b. Inventory turnover ratios:
Discount Ski:
Aspen Sports:
c. Average days to sell inventory:
Discount Ski:
Aspen Sports:
5-72