Financial accounting

Exercise
5-3A Allocating product cost between cost of goods sold and ending inventory:
multiple purchases

Suggs
Company sells coffee makers used in business offices.  Its beginning inventory of coffee makers was
400 units at $50 per unit.  During the
year, Suggs made two batch purchases of coffee makers.  The first was a 500-unit purchase at $55 per unit;
the second was a 600-unit purchase a $58 per unit.  During the period, Suggs sold 1,200 coffee
makers.

Required

Determine
the amount of product costs that would be allocated to cost of goods sold and
ending inventory, assuming that Suggs uses

a. FIFO

b. LIFO

c.
Weighted average

Exercise
5-4A Effect of inventory cost flow (FIFO, LIFO, and weighted average) on gross
margin.

The
following information pertains to Baxter Company for 2013:

  Beginning inventory  90 units @ $15

  Units purchased  320 units @
$19

Ending
inventory consisted of 40 units.  Baxter
sold 370 units at $30 each.  All
purchases and sales were made with cash. 

Require

a.
Compute the gross margin for Baxter Company using the following cost flow
assumptions:

(1) FIFO,
(2) LIFO, and (3) weighted average.

b. What
is the dollar amount of difference in net income between using FIFO versus
LIFO?

c.  Determine the cash flow from operating
activities, using each of the three cost flow assumptions listed in Requirement
a.  Ignore the effect of income
taxes.  Explain why these cash flows have
no differences.

Exercise
5-5A Effect of inventory cost flow on ending inventory balance and gross margin


Dugan
Sales had the following transactions for jackets in 2013, its first year of
operations:

  Jan. 20  Purchased  80 units @ $15  =  $ 1,200

  Apr. 21  Purchased 420 units @ $16  =  6,720

  July. 
25  Purchased 250 units @
$20  =  5,000

  Sept. 19  Purchased  150 units @ $22  =  3,300

During
the year, Dugan Sales sold 830 jackets for $40 each.

Required

a. Compute
the amount of ending inventory Dugan would report on the balance sheet,
assuming the following cost flow assumptions: (1) FIFO, (2) LIFO, and (3)
weighted average.

b.
Record the above transactions in general journal form and post to T-accounts
using (1) FIFO, (2) LIFO, and (3) weighted average.  Use a separate set of journal entries and
T-accounts for each method.  Assume all
transactions are cash transactions. 

c.
Compute the difference in gross margin between the FIFO and LIFO cost flow
assumptions.

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