Exercise 6-4: FIFO, LIFO, and Weighted Average Cost Methods for

School: Purdue University - Course: MGMT 2000 - Subject: Accounting

Exercise 6-4 (LO 6-3) Requirement 1FIFO (a) DateTransactionNumberof unitsUnitcostEnding Inventory Oct. 6Purchase80$58$4,640 (b) DateTransactionNumberof unitsUnitcostCost of Goods Sold Jan. 1Beginning inventory60$52$3,120 Apr. 7Purchase140547,560 Jul. 16Purchase2105711,970 Oct. 6Purchase40582,320 450a $24,970 a First 450 units purchased are assumed sold (c)Sales revenue= 450 units×$70 =$31,500 (d)Gross profit= Sales revenue − Cost of goods sold = $31,500 − $24,970 =$6,530

Exercise 6-4 (continued) Requirement 2LIFO (a) DateTransactionNumberof unitsUnitcostEnding Inventory Jan. 1Beginning Inventory60$52$3,120 Apr. 7Purchase20541,080 80$4,200 (b) DateTransactionNumberof unitsUnitcostCost of Goods Sold Apr. 7Purchase120$54$6,480 Jul. 16Purchase2105711,970 Oct. 6Purchase120586,960 450a $25,410 a Last 450 units purchased are assumed sold (c)Sales revenue= 450 units × $70 =$31,500 (d)Gross profit= Sales revenue − Cost of goods sold = $31,500 − $25,410 =$6,090

Exercise 6-4 (concluded) Requirement 3Weighted average DateTransactionNumberof unitsUnitcostTotal cost Jan. 1Beginning Inventory60$52$3,120 Apr. 7Purchase140547,560 Jul. 16Purchase2105711,970 Oct. 6Purchase120586,960 530$29,610 Weighted-average cost = $29,610 / 530 units = $55.8679 (a)Ending inventory= 80 units×$55.8679 =$4,469.43 (b)Cost of goods sold= 450 units×$55.8679 = $25,140.57 (rounded) (c)Sales revenue= 450 units×$70 =$31,500 (d)Gross profit= Sales revenue − Cost of goods sold = $31,500 − $25,140.57 =$6,359.43 Requirement 4 FIFOLIFOWeighted- average Gross profit$6,530$6,090$6,359.43