Tutorial 9

S6-3 Preparing a perpetual inventory record and journal entries—Specific identification

Learning Objective 2
Requirements
1. Prepare Montana Cycle’s perpetual inventory record assuming the company uses the specific
identification inventory costing method. Assume that Montana sold 20 bicycles that cost $36
each and 13 bicycles that cost $60 each.
2. Journalize the July 16 purchase of merchandise inventory on account and the July 31 sale of
merchandise inventory on account.

S6-4 Preparing a perpetual inventory record and journal entries—FIFO

Learning Objective 2
Requirements
1. Prepare Montana Cycle’s perpetual inventory record assuming the company uses the FIFO
inventory costing method.
2. Journalize the July 16 purchase of merchandise inventory on account and the July 31 sale of
merchandise inventory on account.

S6-5 Preparing a perpetual inventory record and journal entries—LIFO

Learning Objective 2
Requirements
1. Prepare Montana Cycle’s perpetual inventory record assuming the company uses the LIFO
inventory costing method.
2. Journalize the July 16 purchase of merchandise inventory on account and the July 31 sale of
merchandise inventory on account.

S6-6 Preparing a perpetual inventory record and journal entries—Weighted-average

Learning Objective 2
Requirements
1. Prepare Montana Cycle’s perpetual inventory record assuming the company uses the
weighted-average inventory costing method.
2. Journalize the July 16 purchase of merchandise inventory on account and the July 31 sale of
merchandise inventory on account.
S6-7 Comparing Cost of Goods Sold under FIFO, LIFO, and Weighted-average
Learning Objective 3
Refer to Short Exercises S6-4 through S6-6. After completing those exercises, answer the
following questions:
Requirements
1. Which inventory costing method produced the lowest cost of goods sold?
2. Which inventory costing method produced the highest cost of goods sold?
3. If costs had been declining instead of rising, which inventory costing method would have
produced the highest cost of goods sold?

Use the following information to answer Exercises E6-16 through E6-18.

Putter’s Choice carries an inventory of putters and other golf clubs. The sales price of each putter
is $119. Company records indicate the following for a particular line of Putter’s Choice putters:

E6-16 Measuring and journalizing merchandise inventory and cost of goods sold—FIFO
Learning Objective 2
1. CoGS $2,940
Requirements
1. Prepare a perpetual inventory record for the putters assuming Putter’s Choice uses the FIFO
inventory costing method. Then identify the cost of ending inventory and cost of goods sold
for the month.
2. Journalize Putter’s Choice’s inventory transactions using the FIFO inventory costing method.
(Assume purchases and sales are made on account.)

E6-17 Measuring ending inventory and cost of goods sold in a perpetual inventory system
—LIFO
Learning Objective 2
1. Ending Merch. Inv. $300
Requirements
1. Prepare Putter’s Choice’s perpetual inventory record for the putters assuming Putter’s Choice
uses the LIFO inventory costing method. Then identify the cost of ending inventory and cost
of goods sold for the month.
2. Journalize Putter’s Choice’s inventory transactions using the LIFO inventory costing method.
(Assume purchases and sales are made on account.)

E6-18 Measuring ending inventory and cost of goods sold in a perpetual inventory system
—Weighted-average
Learning Objective 2
1. CoGS $2,970
Requirements
1. Prepare Putter’s Choice’s perpetual inventory record for the putters assuming Putter’s Choice
uses the weighted-average inventory costing method. Round weighted-average cost per unit
to the nearest cent and all other amounts to the nearest dollar. Then identify the cost of
ending inventory and cost of goods sold for the month.
2. Journalize Putter’s Choice’s inventory transactions using the weighted-average inventory
costing method. (Assume purchases and sales are made on account.)

E6-19 Comparing amounts for cost of goods sold, ending inventory, and gross profit—
FIFO and LIFO
Learning Objectives 2, 3
Assume that JR Toys store bought and sold a line of dolls during December as follows:

JR Toys uses the perpetual inventory system.

Requirements
1. Compute the cost of goods sold, cost of ending merchandise inventory, and gross profit using
the FIFO inventory costing method.
2. Compute the cost of goods sold, cost of ending merchandise inventory, and gross profit using
the LIFO inventory costing method.
3. Which method results in a higher cost of goods sold?
4. Which method results in a higher cost of ending merchandise inventory?
Which method results in a higher gross profit?

E6-20 Comparing cost of goods sold and gross profit—FIFO, LIFO, and weighted-average
methods
Learning Objectives 3
1. COGS $2,072
Assume that JR Tire store completed the following perpetual inventory transactions for a line of
tires:

Requirements
1. Compute cost of goods sold and gross profit using the FIFO inventory costing method.
2. Compute cost of goods sold and gross profit using the LIFO inventory costing method.
3. Compute cost of goods sold and gross profit using the weighted-average inventory costing
method. (Round weighted-average cost per unit to the nearest cent and all other amounts to
the nearest dollar.)
4. Which method results in the largest gross profit, and why?

P6-33B Accounting for inventory using the perpetual inventory system—FIFO, LIFO, and
weighted-average
Learning Objectives 2, 3
2. Ending Merch. Inv., $4,550

Fit World began January with merchandise inventory of 90 crates of vitamins that cost a total of
$5,850. During the month, Fit World purchased and sold merchandise on account as follows:
Requirements
1. Prepare a perpetual inventory record, using the FIFO inventory costing method, and
determine the company’s cost of goods sold, ending merchandise inventory, and gross profit.
2. Prepare a perpetual inventory record, using the LIFO inventory costing method, and
determine the company’s cost of goods sold, ending merchandise inventory, and gross profit.
3. Prepare a perpetual inventory record, using the weighted-average inventory costing method,
and determine the company’s cost of goods sold, ending merchandise inventory, and gross
profit. (Round weighted-average cost per unit to the nearest cent and all other amounts to the
nearest dollar.)
4. If the business wanted to pay the least amount of income taxes possible, which method would
it choose?

P6-34B Accounting for inventory using the perpetual inventory system—FIFO, LIFO, and
weighted-average, and comparing FIFO, LIFO, and weighted-average
Learning Objectives 2, 3
5. FIFO GP $5,640

Decorative Steel began January with 70 units of iron inventory that cost $25 each. During
January, the company completed the following inventory transactions:

Requirements
1. Prepare a perpetual inventory record for the merchandise inventory using the FIFO inventory
costing method.
2. Prepare a perpetual inventory record for the merchandise inventory using the LIFO inventory
costing method.
3. Prepare a perpetual inventory record for the merchandise inventory using the weighted-
average inventory costing method.
4. Determine the company’s cost of goods sold for January using FIFO, LIFO, and weighted-
average inventory costing methods.
5. Compute gross profit for January using FIFO, LIFO, and weighted-average inventory costing
methods.
6. If the business wanted to maximize gross profit, which method would it select?

E6A-26 Comparing ending merchandise inventory, cost of goods sold, and gross profit
using the periodic inventory system—FIFO, LIFO, and weighted- average methods
Learning Objective 7
Appendix 6A
2. CoGS $899

Assume that Heavenly Coffee Shop completed the following periodic inventory transactions for
a line of merchandise inventory:

Requirements
1. Compute ending merchandise inventory, cost of goods sold, and gross profit using the FIFO
inventory costing method.
2. Compute ending merchandise inventory, cost of goods sold, and gross profit using the LIFO
inventory costing method.
3. Compute ending merchandise inventory, cost of goods sold, and gross profit using the
weighted-average inventory costing method. (Round weighted-average cost per unit to the
nearest cent and all other amounts to the nearest dollar.)

P6A-37B Accounting for inventory using the periodic inventory system— FIFO, LIFO, and
weighted-average, and comparing FIFO, LIFO, and weighted-average
Learning Objectives 3, 7
Appendix 6A
1. LIFO Ending Merch. Inv., $10,200
Best Yet Electronic Center began October with 100 units of merchandise inventory that cost $78
each. During October, the store made the following purchases:

Best Yet uses the periodic inventory system, and the physical count at October 31 indicates that
130 units of merchandise inventory are on hand.

Requirements
1. Determine the ending merchandise inventory and cost of goods sold amounts for the October
financial statements using the FIFO, LIFO, and weighted-average inventory costing methods.
2. Sales revenue for October totaled $23,000. Compute Best Yet’s gross profit for October
using each method.
3. Which method will result in the lowest income taxes for Best Yet? Why? Which method will
result in the highest net income for Best Yet? Why?