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Scoresby Inc

Accounting

Scoresby Inc. tracks the number of units purchased and sold throughout each year but applies its inventory costing method at the end of the year, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31.

Transactions Units Unit Cost
  a. Inventory, Beginning   4,000   $ 16  
  For the year:            
  b. Purchase, March 5   10,000     17  
  c. Purchase, September 19   6,000     19  
  d. Sale, April 15 (sold for $61 per unit)   4,200        
  e. Sale, October 31 (sold for $64 per unit)   9,000        
  f. Operating expenses (excluding income tax expense), $602,000            
 

Calculate the number and cost of goods available for sale.

Calculate the number of units in ending inventory.

Compute the cost of ending inventory and cost of goods sold under (a) FIFO, (b) LIFO, and (c) weighted average cost.

Prepare an income statement that shows the FIFO method, LIFO method and weighted average method.

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Answer:

Req.1

Number of goods available for Sale 20,000 units
Cost of goods available for sale $348,000

Explanation:

  Units (a) Cost Per Unit (b) Goods available for sale ( a*b)
A 4000 $16 $64,000
B 10,000 $17 $170,000
C 6000 $19 $114,000
  20,000 Unit - $348,000

Req.2

Number of Units in Ending Inventory $ 6800 Unit

Explanation:

No. of units available 20,000
less: No. of Unit sold (4200 +9000) (13,200)
No. of units in ending inventory 6800 Unit

Req .3

  Cost of ending inventory Cost of good sold
FIFO $127,600 $220,400
LIFO $111,600 $236,400
Weighted Avg .cost $118,320 $229,680

Explanation:

FIFO

1) Ending Inventory:

Sep.19. 6000 × $19 $ 114,000
Mar.5. 800 × $17 $13,600
6800 Unit $127,600

2) Cost of Good Sold:

Cost of goods available for sale $348,000
Less: Ending Inventory ($127,600)
Cost of good sold $220,400

LIFO:

1)  Ending Inventory:

Beg. inventory. 4000 $16 $64,000   
Mar.5. 2800 × $ 17 $47,600
6800 Unit $111,600

2) Cost of Good Sold:

Cost of goods available for sale $348,000
Less: Ending Inventory ($111,600)
Cost of good sold $236,400

Weighted Average Cost:

1) Weighted Avg. Cost Per Unit:

Cost of goods available for sale( a) $348,000
No of units available ( b) 20,000
Weighted Avg cost per unit( a÷b) $17.4 per unit

2)

Ending Inventory. ( 6800 × 17.4) $ 118,320
Cost of'good'sold (13,200 × $ 17.4) $ 229,680

Req.4 Income Statement:

SCORESBY INC.
Income Statement
For the year ended December 31
  FIFO LIFO Weighted Avg.Cosj
Sales Revenue $832,200 $832,200 $832,200
Cost of Good Sold ($220,400) (236,400) (229,680)
Gross Profit $611,800 $595,800 $602,520
       
Operating Expense ($602,000) ($602,000) ($602,000)
Income /( Loss) $9800 - $6200 $520

1) Sales:

( 4200 ×$61) + ( 9000 ×$64)= $832,200