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Montoure Company uses a perpetual inventory system
Montoure Company uses a perpetual inventory system. It entered into the following calendar-year purchases and sales transactions. (For specific identification, units sold consist of 600 units from beginning inventory, 300 from the February 10 purchase, 200 from the March 13 purchase, 50 from the August 21 purchase, and 250 from the September 5 purchase.) Date Activities Units Acquired at Cost Units Sold at Retail Jan. 1 Beginning inventory 600 units @ $45.00 per unit Feb. 10 Purchase 400 units @ $42.00 per unit Mar. 13 Purchase 200 units @ $27.00 per unit Mar. 15 Sales 800 units @ $75.00 per unit Aug. 21 Purchase 100 units @ $50.00 per unit Sept. 5 Purchase 500 units @ $46.00 per unit Sept. 10 Sales 600 units @ $75.00 per unit Totals 1,800 units 1,400 units
Required
1.Compute cost of goods available for sale and the number of units available for sale.
2.Compute the number of units in ending inventory.
3.Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification. (Round all amounts to cents.) Check (3) Ending inventory: FIFO, $18,400; LIFO, $18,000; WA, $17,760
4.Compute gross profit earned by the company for each of the four costing methods in part 3. (4) LIFO gross profit, $45,800
Expert Solution
Answer:
1. $77,200 Cost of goods available for sale & 1,800 units available for sale
2. 400 units in ending inventory
3. FIFO $18,400, LIFO $18,000, WEIGHTED AVERAGE $17,760 and SPECIFIC $18,200
4. FIFO $46,200, LIFO $45,800, WEIGHTED AVERAGE $45,560 and SPECIFIC $46,000
Explanation:
1. Cost of goods available for sale is computed as follows:
1-Jan 600 45 27,000
10-Feb 400 42 16,800
13-Mar 200 27 5,400
21-Aug 100 50 5,000
5-Sep 500 46 23,000
1,800 77,200
2.Units ending inventory is computed by deducting available units for sale 1,800 by the units sold 1,400 equals 400 units.
3. Ending inventory is computed as follows:
FIFO
5-Sep 400 x $46 = $18,400.00
LIFO
Jan 1 400 x $45 = $18,000.00
SPECIFIC
10-Feb 100 x $42 = 4,200.00
21-Aug 50 x $50 = 2,500.00
5-Sep 250 x $46 = 11,500.00
400 18,200.00
WEIGHTED AVERAGE
Jan 1 600 x $45.00 = 27,000.00
10-Feb 400 x $42.00 = 16,800.00
13-Mar 200 x $27.00 = 5,400.00
1,200 41.00 49,200.00
Sales (800) x $41.00 = (32,800.00)
Total 400 $41.00 16,400.00
21-Aug 100 x $50.00 = 5,000.00
5-Sep 500 x $46.00 = 23,000.00
Total 1,000 $44.40 44,400.00
Sale (600) $44.40 (26,640.00)
Balance 400 $44.40 17,760.00
4. computation of gross profit are as follows:
FIFO
SALE
15-Mar 800.00 75.00 60,000.00
10-Sep 600.00 75.00 45,000.00
1,400.00 105,000.00
COGS FIFO
Date Units Price Amount
1-Jan 600 45 27,000
10-Feb 200 42 8,400
10-Feb 200 42 8,400
13-Mar 200 27 5,400
21-Aug 100 50 5,000
5-Sep 100 46 4,600
TOTAL 1,400 252 58,800
GROSS PROFIT $46,200 ($105,000 - $58,800)
LIFO
SALE
15-Mar 800 75.00 60,000.00
10-Sep 600 75.00 45,000.00
TOTAL 1,400 105,000.00
COGS LIFO
Date Units Price Amount
1-Jan 200 45 9,000
10-Feb 200 42 8,400
10-Feb 200 42 8,400
13-Mar 200 27 5,400
21-Aug 100 50 5,000
5-Sep 500 46 23,000
1,400 59,200
GROSS PROFIT $45,800 (105,000 - 59,200)
SALE SPECIFIC
Date Units Price Amount
1 Jan 600 75 45,000
10-Feb 300 75 22,500
13-Mar 200 75 15,000
21-Aug 50 75 3,750
5-Sep 250 75 18,750
TOTAL 1,400 105,000
COGS SPECIFIC
Date Units Price Amount
01-Jan 600 45 27,000
10-Feb 300 42 12,600
13-Mar 200 27 5,400
21-Aug 50 50 2,500
5-Sep 250 46 11,500
TOTAL 1,400 59,000
GROSS PROFIT $46,000 (105,000 - 59,000)
WEIGHTED AVERAGE
Date Units Price Amount
1-Jan 600 45.00 27,000.00
10-Feb 400 42.00 16,800.00
13-Mar 200 27.00 5,400.00
1,200 41.00 49,200.00
Sale (800) 41.00 (32,800.00)
Total 400 41.00 16,400.00
21-Aug 100 50.00 5,000.00
5-Sep 500 46.00 23,000.00
Total 1,000 44.40 44,400.00
Sales (600) 44.40 (26,640.00)
Balance 400 44.40 17,760.00
Therefore, the computation of cost of goods sold is,
COST OF GOODS SOLD
15-Mar 800 41.00 32,800.00
10-Sep 600 44.40 26,640.00
Total 1,400 59,440.00
SALE
15-Mar 800 75.00 60,000.00
10-Sep 600 75.00 45,000.00
Total 1,400 105,000.00
Gross profit $45,560.00 (105,000 - 59,440)
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