Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

PA7-1 Analyzing the Effects of Three Alternative Inventory Methods in a Periodic Inventory System [LO3] Gladstone Limited tracks the number of units purchased and sold

PA7-1 Analyzing the Effects of Three Alternative Inventory Methods in a Periodic Inventory System [LO3]

Gladstone Limited tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31, 2014. Transactions Units Unit Cost Beginning inventory, January 1, 2014 2,000 $ 6.00 Transactions during 2014: a. Purchase, January 30 2,000 9.00 b. Sale, March 14 ($12 each) (1,400 ) c. Purchase, May 1 1,000 10.00 d. Sale, August 31 ($12 each) (1,500 )

Required:

1. Compute the amount of goods available for sale, ending inventory, andcost of goods sold at December 31, 2014, under each of the following inventory costing methods. For Specific identification, assuming that the March 14, 2014, sale was selected two-fifths from the beginning inventory and three-fifths from the purchase of January 30, 2014. Assume that the sale of August 31, 2014, was selected from the remainder of the beginning inventory, with the balance from the purchase of May 1, 2014. (Do not round Weighted average cost per unit. Round your final answers to the nearest dollar amount.)

image text in transcribed

2-a. Of the three methods, which will result in the highest gross profit? Weighted average cost First-in, first-out Specific identification

2-b. Of the three methods, which will result in the lowest income taxes? Weighted average First-in-first-out

Goods available for sale Ending inventory Cost of goods sold a. Weighted average b. First-in, first-out. c. Specific identification. cost

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditors Letter Handbook

Authors: American Bar Association Business Law Section

2nd Edition

161438973X, 978-1614389736

More Books

Students also viewed these Accounting questions

Question

4-6 Is there a digital divide? If so, why does it matter?

Answered: 1 week ago