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Cost of sales, Ending inventory under FIFO, LIFO

1) Use the following information to calculate 1.) ending inventory 2.) Cost of Sales and 3.) gross margin under the inventory methods shown below. Assume that a periodic inventory system is employed and all sales are made at a price of $15/unit.

Date Description Quantity Per Unit Cost
11/1/2002 Beginning Inventory 70 $7.00
11/2/2002 Purchase 30 $8.00
11/11/2002 Purchase 40 $9.00
11/17/2002 Sales 25 n/a
11/22/2002 Purchase 15 $10.00
11/27/2002 Sales 40 na
11/30/2002 Purchase 10 $11.00

Sale
Date Description Quantity Sales price per unit Total revenue
11/17/2002 Sales 25 $15.00 $375.00
11/27/2002 Sales 40 $15.00 $600.00
65 $975.00

2) a.) STU Corporation purchased a piece of equipment on April 1, 2001 for 29,600. The equipment has an estimates life of five years or 27,000 units of production and an estimated residual value of 2,600. Compute depreciation for 2001, 2002 and 2003, using the methods indicated below. Assume that the company's fiscal year corresponds to the calendar year and that 4,700, 6050, and 4,350 units were produced in the respective years.
b.) Under the straight line method, assume that at the end of 2003 it was determined that the salvage value changed to 2,000.00 and that the estimated life changed to a total of seven years. What would the depreciation expense be for 2004?

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Solution Preview

The answer is in the excel file attached.
Use the following information to calculate 1.) ending inventory 2.) Cost of Sales and 3.) gross margin
under the inventory methods shown below. Assume that a periodic inventory system is employed
and all sales are made at a price of $15/unit.

Date Description Quantity Per Unit Cost
11/1/2002 Beginning Inventory 70 $7.00
11/2/2002 Purchase 30 $8.00
11/11/2002 Purchase 40 $9.00
11/17/2002 Sales 25 n/a
11/22/2002 Purchase 15 $10.00
11/27/2002 Sales 40 na
11/30/2002 Purchase 10 $11.00

Sale
Date Description Quantity Sales price per unit Total revenue
11/17/2002 Sales 25 $15.00 $375.00
11/27/2002 Sales 40 $15.00 $600.00
65 $975.00

Average Cost

Cost of Sales
Total cost
11/1/2002 Beginning Inventory 70 $7.00 $490.00

11/2/2002 Purchase 30 $8.00 $240.00
11/11/2002 Purchase 40 $9.00 $360.00
11/22/2002 Purchase 15 $10.00 $150.00
11/30/2002 Purchase 10 $11.00 $110.00
95 $860.00

Beginning inventory+ Purchase= 165 $1,350.00 Unit cost= 8.18

Unit cost Value of inventory
Ending Inventory =165-100 100 $8.18 $818.00

Gross Margin =Sales- (Beginning inventory+Purchases)+Ending ...

Solution Summary

There are two problems
The solution to the first problem provides steps for the calculation of Cost of sales, Gross Margin and Ending inventory under FIFO, LIFO and Average Cost inventory methods.
The solution to the second problem calculates depreciation using straight line and double declining balance methods.
The solutions are provided in the attached excel file.

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