Question

The beginning inventory for Dunne Co. and data on purchases and sales for a three-month period are as follows: Date Transaction Number of Units Per Unit Total Apr. 3 Inventory 25 $1,200 $30,000 8 Purchase 75 1,240 93,000 11 Sale 40 2,000 80,000 30 Sale 30 2,000 60,000 May 8 Purchase 60 1,260 75,600 10 Sale 50 2,000 100,000 19 Sale 20 2,000 40,000 28 Purchase 80 1,260 100,800 June 5 Sale 40 2,250 90,000 16 Sale 25 2,250 56,250 21 Purchase 35 1,264 44,240 28 Sale 44 2,250 99,000 Required: 1. Determine the inventory on June 30 and the cost of goods sold for the three-month period, using the first-in, first-out method and the periodic inventory system. Inventory, June 30 $ Cost of goods sold $ 2. Determine the inventory on June 30 and the cost of goods sold for the three-month period, using the last-in, first-out method and the periodic inventory system. Inventory, June 30 $ Cost of goods sold $ 3. Determine the inventory on June 30 and the cost of goods sold for the three-month period, using the weighted average cost method and the periodic inventory system. Note: Round the weighted average unit cost to the nearest dollar and final answers to the nearest dollar. Inventory, June 30 $ Cost of goods sold $ 4. Compare the gross profit and June 30 inventories using the following column headings. For those boxes in which you must enter subtracted or negative numbers use a minus sign. FIFO LIFO Weighted Average Sales $ $ $ Cost of goods sold Gross profit $ $ $ Inventory, June 30 $ $ $

Answer 1

Answer:

Dunne Co.

1. Determine the inventory on June 30 and the cost of goods sold for the three-month period, using the first-in, first-out method and the periodic inventory system:

a) Inventory, June 30  = $32,864 (26 x $1,264)

b) Cost of goods sold = Cost of goods available for sale - Ending Inventory = $310,776 ($343,640 - $32,864)

2. Determine the inventory on June 30 and the cost of goods sold for the three-month period, using the last-in, first-out method and the periodic inventory system:

a) Inventory, June 30 =  $

Beginning Inventory 25 units at $1,200 = $30,000

Purchase on April 8, 1 unit at $1,240              1,240

Total Ending Inventory                              $31,240

b)Cost of goods sold = Cost of goods available for sale - Ending Inventory

= $311,400 ($343,640 - $32,240)

3. Determine the inventory on June 30 and the cost of goods sold for the three-month period, using the weighted average cost method and the periodic inventory system. Note: Round the weighted average unit cost to the nearest dollar and final answers to the nearest dollar:

a) Inventory, June 30 = $32,489.60 (26 x $1,249.60)

b) Cost of goods sold = $311,150.40 (249 x $1,249.60)  

4. Compare the gross profit and June 30 inventories using the following column headings. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

                                     FIFO                  LIFO         Weighted Average

Sales                            $525,250         $525,250         $525,250

Cost of goods sold         310,776              311,400              311,150

Gross profit                  $214,474           $213,850           $214,100

Inventory, June 30       $32,864             $31,240           $32,489.60

Explanation:

a) Purchases and Sales Data:

Date     Transaction     Number of Units    Per Unit       Total

                                       In        Out                                 Cost      Sales

Apr. 3    Inventory          25                       $1,200     $30,000

      8     Purchase          75                         1,240        93,000

     11     Sale                               40          2,000                          80,000

    30    Sale                               30          2,000                          60,000

May 8   Purchase          60                       1,260         75,600

     10   Sale                               50          2,000                         100,000

     19   Sale                               20          2,000                          40,000

    28   Purchase          80                       1,260       100,800

June 5 Sale                              40          2,250                          90,000

     16   Sale                              25          2,250                         56,250

     21   Purchase          35                      1,264        44,240

    28   Sale                              44          2,250                         99,000

b) Goods Available     275                                 $343,640

Cost of goods sold    249                                                   $525,250

Ending Inventory         26

c) Average cost of goods = Cost of goods available for sale/Quantity of goods available for sale = $343,640/275 = $1,249.60

d) FIFO, LIFO, and Weighted Average Costing Method under the periodic inventory system assume that 1) FIFO, the goods bought first are sold first; 2) LIFO, the goods bought last are sold first; and 3) Weighted Average, the cost of goods is the weighted average, and lastly that it is only when physical count is taken of inventory that one can estimate its value.  Unlike the perpetual inventory system, the periodic must wait till the end of a financial period to value stock.  The results for ending inventory under the weighted average method, using the perpetual inventory system differs from the results under the same method, using the periodic inventory system.