Exercise 8-12
First-in, first-out (FIFO)
Cost of goods sold:
Date of
sale
Aug. 14
Aug. 25
Total
Cost of
Units Sold
Units sold
2,000 (from Beg. Inv.)
6,000 (from 8/8 purchase)
4,000 (from 8/8 purchase)
3,000 (from 8/18 purchase)
15,000
$6.10
5.50
5.50
5.00
Total Cost
$12,200
33,000
22,000
15,000
$82,200
Ending inventory = 3,000 units x $5.00 = $15,000
Last-in, first-out (LIFO)
Date
Purchased
Sold
Balance
Beginning
inventory
2,000 @ $6.10 = $12,200
2,000 @ $6.10
$12,200
August 8
10,000 @ $5.50 = $55,000
2,000 @ $6.10
10,000 @ $5.50
$67,200
2,000 @ $6.10
2,000 @ $5.50
$23,200
8,000 @ $ 5.50 =
August 14
August 18
$44,000
6,000 @ $5.00 = $30,000
2,000 @ $6.10
2,000 @ $5.50
6,000 @ $5.00
6,000 @ $5.00 =
1,000 @ $5.50 =
August 25
$30,000
$ 5,500
2,000 @ $6.10
1,000 @ $5.50
$53,200
$17,700
Ending
inventory
Total cost of goods sold
=
$79,500
Exercise 8-12 (concluded)
(Note: the perpetual inventory LIFO results are the same as periodic LIFO
results would be, due to the timing of sales and purchases. The same LIFO layers
are on hand at the end of the period under each method. This is unusual. LIFO
perpetual and LIFO periodic normally produce different results for ending
inventory and cost of goods sold.)
Average cost
Date
Beginning
inventory
August 8
Purchased
Sold
Balance
2,000 @ $6.10 = $12,200
2,000 @ $6.10
$12,200
8,000 @ $5.60 =
$44,800 4,000 @ $5.60
$22,400
7,000 @ $5.24 =
$36,680 3,000 @ $5.24
$15,720
10,000 @ $5.50 = $55,000
$67,200
= $5.60/unit
12,000 units
August 14
August 18
6,000 @ $5.00 =
$30,000
$52,400
= $5.24/unit
10,000 units
August 25
Ending
inventory
Total cost of goods sold
=
$81,480
Problem 8-10
Date
Ending Inventory
at Base Year Cost
1/1/06
$400,000
Inventory Layers
at Base Year Cost
Ending
Inventory
DVL Cost
Inventory Layers
Converted to Cost
= $400,000
$400,000 (base)
$400,000 x 1.00 =
$400,000
$400,000
= $420,000
$400,000 (base)
20,000 (2006)
$400,000 x 1.00 =
20,000 x 1.05 =
$400,000
21,000
421,000
$400,000 (base)
20,000 (2006)
15,000 (2007)
$400,000 x 1.00 =
20,000 x 1.05 =
15,000 x 1.12 =
$400,000
21,000
16,800
437,800
$400,000 (base)
20,000 (2006)
5,000 (2007)
$400,000 x 1.00 =
20,000 x 1.05 =
5,000 x 1.12 =
$400,000
21,000
5,600
426,600
1.00
12/31/06
$441,000
1.05
12/31/07
$487,200
= $435,000
1.12
12/31/08
$510,000
= $425,000
1.20
Exercise 9-7
Cost
$35,000
19,120
Beginning inventory
Plus: Net purchases
Net markups
Less: Net markdowns
Goods available for sale
______
54,120
Retail
$50,000
31,600
1,200
(800)
82,000
$54,120
Cost-to-retail percentage:
= 66%
$82,000
Less: Net sales
Estimated ending inventory at retail
Estimated ending inventory at cost (66% x $50,000)
Estimated cost of goods sold
(32,000)
$50,000
(33,000)
$21,120
Exercise 9-16
Cost
$160,000
350,200
Beginning inventory
Plus: Net purchases
Net markups
Less: Net markdowns
Goods available for sale (excluding beginning inventory)
Goods available for sale (including beginning inventory)
_______
350,200
510,200
Retail
$250,000
510,000
7,000
(2,000)
515,000
765,000
$160,000
Base layer cost-to-retail percentage:
= 64%
$250,000
$350,200
2006 layer cost-to-retail percentage:
= 68%
$515,000
Less: Net sales
Estimated ending inventory at current year retail prices
Estimated ending inventory at cost (calculated below)
Estimated cost of goods sold
(380,000)
$385,000
(234,800)
$275,400
___________________________________________________________________________
Ending
Inventory
at Year-end
Retail Prices
Step 1
Ending
Inventory
at Base Year
Retail Prices
Step 2
Inventory
Layers
at Base Year
Retail Prices
Step 3
Inventory
Layers
Converted to
Cost
$385,000
$385,000
(above)
= $350,000
1.10
$250,000 (base)
100,000 (2006)
x 1.00 x 64% =
x 1.10 x 68% =
Total ending inventory at dollar-value LIFO retail cost ......................
$160,000
74,800
$234,800
Problem 9-6
Requirement 1
Cost
$ 20,000
100,151
5,100
(2,100)
Beginning inventory
Plus: Purchases
Freight-in
Less: Purchase returns
Plus: Net markups ($2,500 - 265)
Retail
$ 30,000
146,495
(2,800)
2,235
175,930
$123,151
Cost-to-retail percentage:
= 70%
$175,930
Less: Net markdowns
Goods available for sale
Less:
Normal spoilage
Net sales
Estimated ending inventory at retail
Estimated ending inventory at cost (70% x $34,900)
_______
$123,151
(800)
175,130
(4,500)
(135,730)
$ 34,900
$24,430
Requirement 2
The difference between the inventory estimate per retail method and the
amount per physical count may be due to:
1. Theft losses.
2. Spoilage or breakage above normal.
3. Differences in cost-to-retail percentage for purchases during the month,
beginning inventory, and ending inventory.
4. Markups on goods available for sale inconsistent between cost of goods sold
and ending inventory.
5. A wide variety of merchandise with varying cost-to-retail percentages.
6. Incorrect reporting of markdowns, additional markups or cancellations.
Problem 9-8
($ in 000s)
Cost
$80
671
30
Beginning inventory
Plus: Net purchases
Freight-in
Net markups
Less: Purchase returns
Net markdowns
Goods available for sale (excluding beginning inventory)
Goods available for sale (including beginning inventory)
(1)
___
700
780
Retail
$125
1,006
4
(2)
(8)
1,000
1,125
$80
Base layer cost-to-retail percentage:
= 64%
$125
$700
2006 layer cost-to-retail percentage:
= 70%
$1,000
Less: Net sales
Estimated ending inventory at current year retail prices
Estimated ending inventory at cost (calculated below)
Estimated cost of goods sold
(916)
$209
(130)
$650
___________________________________________________________________________
Ending
Inventory
at Year-end
Retail Prices
Step 1
Ending
Inventory
at Base Year
Retail Prices
Step 2
Inventory
Layers
at Base Year
Retail Prices
Step 3
Inventory
Layers
Converted to
Cost
$209
$209
(above)
= $190
1.10
$125 (base)
65 (2006)
x 1.00 x 64% =
x 1.10 x 70% =
Total ending inventory at dollar-value LIFO retail cost ......................
$ 80
50
$130