Task Team of FUNdaMENTAL aCCOUNTiNg School of Business. Sun Yat-sen University Lesson 7 Merchandise inventories and cost of sales Exercise Calculation and analyzing problems 1. The perpetual inventory records of LIBY HOUSEHOLD show 150 units of a particular duct on hand red at the following dates and Purchase Date Quantity Unit Cost Total Cost May I 5,000 May 4 Total on hand 0 16.500 On May 6, Pace sold 125 units of this product Required: Prepare a journal entry to record the cost of goods sold relating to the sale on May 6, assuming that liby uses ALIFO flow assumption. b A FIFO flow assumption. c The average cost(or moving average)flow assumption 2. Jesica Fashions had the following inventory transactions during the fiscal year ended December 31.2002 Jan 1 Beginning inventory 120 units@ $24/unit Apr 1 Purchase 150 units $29/unit pr 5 Sales nits@ $48/ Jul. 7 Purchase 60 units(@ $25/unit Aug 12 Purchase 80 units@$30/unit Sales 130 units @$48/unit Jesica uses a perpetual inventory system Required: (1)Compute both cost of goods available for sale and the number of units available for sale (2)Compute the number of units remaining in ending inventory (3)Compute the cost assigned to end ing inventory using(a) FIFO,(b)LIFO,(c) specific identification(note: 100 units from beginning inventory, 100 units from the April 1, and 30 units from the August 12 purchase are sold), and( d)weighted average (4)Compute the gross profit earned by the company for each of the costing methods in part 3 (5)If Jesica's manager earns a bonus based on a percent of gross profit, which method inventory costing will the manager likely prefer? 3. A-Mart's prior financial statements report the following related to clothing sales For Year ended december 31 Key figures 2000 2001 2002Task Team of FUNDAMENTAL ACCOUNTING School of Business, Sun Yat-sen University 1 Lesson 7 Merchandise Inventories and Cost of Sales Exercise Calculation and Analyzing Problems 1. The perpetual inventory records of LIBY HOUSEHOLD show 150 units of a particular product on hand, acquired at the following dates and costs: Purchase Date Quantity Unit Cost Total Cost May 1 50 $100 $ 5,000 May 4 100 115 11,500 Total on hand 150 $16,500 On May 6, Pace sold 125 units of this product. Required: Prepare a journal entry to record the cost of goods sold relating to the sale on May 6, assuming that LIBY uses: a A LIFO flow assumption. b A FIFO flow assumption. c The average cost (or moving average) flow assumption. 2. Jesica Fashions had the following inventory transactions during the fiscal year ended December 31, 2002: Jan. 1 Beginning inventory 120 units @ $24/unit Apr. 1 Purchase 150 units @ $29/unit Apr. 5 Sales 100 units @ $48/unit Jul. 7 Purchase 60 units @ $25/unit Aug.12 Purchase 80 units @ $30/unit Sept. 2 Sales 130 units @ $48/unit Jesica uses a perpetual inventory system. Required: (1) Compute both cost of goods available for sale and the number of units available for sale. (2) Compute the number of units remaining in ending inventory. (3) Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) specific identification (note: 100 units from beginning inventory, 100 units from the April 1, and 30 units from the August 12 purchase are sold), and (d) weighted average. (4) Compute the gross profit earned by the company for each of the costing methods in part 3. (5) If Jesica’s manager earns a bonus based on a percent of gross profit, which method of inventory costing will the manager likely prefer? 3. A-Mart’s prior financial statements report the following related to clothing sales: For Year Ended December 31 Key Figures 2000 2001 2002