Ace Lawn Care Module 3 Mini Practice Problem

In June, Jim decided to open a small retail operation selling bags of fertilizer to the public. He has decided to begin by offering two kinds of fertilizer. Below is the information for the month of June, 2014, for the two types of fertilizer.

Product Selling Price Feed All Fertilizer $27.00 Weed and Feed All Fertilizer $35.00

Purchase Data Date Product Quantity (Bags) Price per Bag 6/1/2014 Feed All Fertilizer 10 15.00 6/1/2014 Weed and Feed All Fertilizer 10 20.00 6/11/2014 Feed All Fertilizer 20 15.50 6/15/2014 Weed and Feed All Fertilizer 10 19.50 6/22/2014 Feed All Fertilizer 10 15.75 6/28/2014 Feed All Fertilizer 10 15.50 6/28/2014 Weed and Feed All Fertilizer 10 19.75 All purchases are paid in cash at the time of the purchase and Jim picks up the fertilizer from the distributor, so there is no freight charge.

Sales Data (summarized by week) Date Product Quantity (Bags) 6/9/2014 Feed All Fertilizer 6 6/9/2014 Weed and Feed All Fertilizer 4 6/16/2014 Feed All Fertilizer 12 6/16/2014 Weed and Feed All Fertilizer 5 6/23/2014 Feed All Fertilizer 8 6/23/2014 Weed and Feed All Fertilizer 2 6/30/2014 Feed All Fertilizer 10 6/30/2014 Weed and Feed All Fertilizer 4 All sales are on credit.

In addition to the sales, on 6/20/14, a customer returned one bag of Feed All Fertilizer to Jim for credit on account.

Instructions: 1. Calculate the Cost of Goods Sold and the Ending Inventory values for the fertilizer products under 1) Average Cost, 2) First-In, First-Out(FIFO), and 3) Last-In, First-Out (LIFO). You will need to calculate ending inventory from the purchase, sale and return data given, you may assume that a physical count confirmed your calculation of the number of units in ending inventory. 2. Assume that Jim decides to use the FIFO method and compute the lower of cost or market (LCM) value to be reported for the end of June, 2014. Use the last purchase prices for the market value. You only need to calculate cost under the FIFO method for this comparison. 3. Prepare the Cost of Goods Sold section of the Income Statement.

1) Average Cost COST OF GOODS AVAILABLE FOR SALE Feed All Fertilizer Unit Cost Explanation Units Total Cost Date ENDING INVENTORY COST OF GOODS SOLD COST OF GOODS AVAILABLE FOR SALE Weed and Feed All Fertilizer Explanation Units Date Unit Cost Total Cost ENDING INVENTORY COST OF GOODS SOLD 2) First-In, First-out (FIFO) COST OF GOODS AVAILABLE FOR SALE Feed All Fertilizer Explanation Units Unit Cost Total Cost Date ENDING INVENTORY COST OF GOODS SOLD Sample of how to fill out this page using Average Cost COST OF GOODS AVAILABLE FOR SALE xoxx Fertilizer Date Explanation Units Unit Cost Total Cost 6/15 Purchase $5.00 S50.00 Purchase 25 $5.10 2750 Total 35 77.50 ENDING INVENTORY COST OF GOODS SOLD S 177.50 135 Cost of Goods Available for Sale 77.50 $5.07 Less: Ending inventory 55.77 Units Unit Cost Total Cost Cost of Goods Sold 21.73 5.07 $55.77 A good example is located in your e-text (llustration 6-6) Sample of the El and COGS calculation for FlFO or LIFO, Costof Goods Available is the same as in the Average Cost sample above ENDING INVENTORY COST OF GOODS SOLD Unit Cost Total Cost Cost of Goods Available for Sale S 77.50 Date Units 11 5,10 56.10 Less: Ending inventory 56.10 Cost of Goods Sold 21.40 otal 56,10