P7-3 Comparing and Contrasting the Effects of Inventory Costing Methods on Financial Statement Elements LO7-2, 7-3

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P7-3 Comparing and Contrasting the Effects of Inventory Costing Methods on Financial Statement Elements LO7-2, 7-3 Neverstop Corporation sells item A as part of its product line Information about the beginning inventory, purchases, and sales of item A are given in the following table for the first six months of the current year. The company uses a perpetual inventory system, Purchases Number of Units Unit Cost 535 $3.20 Sales Number of Units Sales Price Date January 1 (beginning inventory) January 24 February 8 March 16 June 11 335 54.70 635 $3.30 335 $4.70 635 53.30 Required: 1. Compute the cost of ending inventory by using the weighted-average costing method. (Do not round intermediate calculations and round the final answer to 2 decimal places.) Ending Inventory $ 3.734.15 2. Compute the gross profit for the first six months of the current year by using the FIFO costing method. (Do not round intermediate calculations and round the final answer to 2 decimal places.) Gross prolik $ 991,50 3. Would the gross profit be higher, lower, or the same it Neverstop used the weighted average costing method rather than the FIFO method? Remain the same Higher Lower 4. Prepare journal entries to record the purchase and sale transactions, as well as the cost of sales, assuming that all sales and purchase transactions are on account and that the weighted average method is used. (Do not round intermediate calculations and round the final answers to 2 decimal places. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list View journal entry worksheet No 1 January 24 Accounts receivable Sales 1,574,50 1,574.50 2 January 24 Cost of sales Inventory 1.712.00 1,712.00 3 February 08 Inventory Accounts payable 2,095,50 2,095,50 4 March 16 Accounts receivable Sales 1,574 50 1,574 50 5 March 16 1,574 50 Cost of sales Inventory 1.57450 6 June 11 2,095 50 Inventory Accounts payable 2,095 50 Assume that because of a clerical error, the ending Inventory is reported to be 1,035 units rather than the actual number of units (1135) on hand. 5a. If FIFO is used, calculate the amount of the understatement or overstatement in the cost of sales for the first six months of the current year. ol cost of sales 5b. if FIFO is used, calculate the amount of the understatement or overstatement in the current assets at June 30 of the current year, of current assets