Exercise $6-2$ Alternative cost flow assumptions$-$perpetual LO$2$ e$)$cel

CHECK FIGURES: COGS a$.$ $$9,400\mathrm{.}00$; b$.$ $$9,417\mathrm{.}90$

Urban Glam Cosmetics made purchases of lipstick in the current year as follows:

Jan. $1$ Beginning inventory

Mar. $14$ Purchased

$\backslash$table$[[75$ units,@$,$$$12\mathrm{.}00,=,900],[250$ uni,@$,$$$13\mathrm{.}00,=,3,250],[0,$@$,$$$14\mathrm{.}00,=,7,000]]$

July $30$ Purchased

$\frac{500\text{u}\text{n}\text{i}\text{t}\text{s}}{825\text{u}\text{n}\text{i}\text{t}\text{s}}$

Units available for sale

Cost of goods available for sale.

$$11,150$

Urban Glam Cosmetics made sales on the following dates at a selling price of $$35$ per unit:

Jan. $10$

$70$ units

Mar. $15$

Oct. $5$

Total

$180$ units

$450$ units

$700$ units

Required The business uses a perpetual inventory system. Determine the costs that should be assigned to the ending inventory and to goods sold under:

a$.$ FIFO

b$.$ Moving weighted average $($round to the nearest whole cent$)$

Also calculate the gross profit under each method.

$441$

Exercise $6-6$ Specific identification cost flow assumption LO$2$ eYcel

CHECK FIGURE: COGS $=$$$4,529\mathrm{.}50$

Use the information in Exercise $6-5.$ Assume that Car Armour specifically sold the following units:

$\backslash$table$[[$Jan$.10$:$,80,$units from beginning inventory$],[$Mar$.15$:$,10,$units from beginning inventory, and$],[120,$units from the March $7$ purchase$],[$Oct$.5$:$,200,$units from the July $28$ purchase, and$],[470,$units from the October $3$ purchase$]]$

Calculate cost to be assigned to ending inventory and cost of goods sold.

Exercise $6-7$ Income statement effects of alternative cost flow assumptions LO$3$

Use the data in Exercises $6-5$ and $6-6$ to construct comparative income statements for Car Armour $($year$-$end December $31,2020),$ similar to those shown in Exhibit $6\mathrm{.}8$ in the chapter. Assume that operating expenses are $$1,250.$

Which method results in the highest profit?

If costs were rising instead of falling, which method would result in the highest profit?