Margarete T.

Camins

Answers to Final Exam on Financial Management

Problem 1
A. FIFO
UNITS UNIT PRICE TOTAL COST
Dec 1 Purchase 800 700.00 560,000.00
8 Sale 600 700.00 420,000.00
Balance 200 700.00 140,000.00
14 Purchase 1200 650.00 780,000.00
200 700.00 140,000.00
Balance
1200 650.00 780,000.00
18 200 700.00 140,000.00
Sale
880 650.00 572,000.00
Balance 320 650.00 208,000.00
30 Purchase 800 725.00 580,000.00
320 650.00 208,000.00
Balance
800 725.00 580,000.00
788,000.00

B. LIFO
UNITS UNIT PRICE TOTAL COST
Dec 1 Purchase 800 700.00 560,000.00
8 Sale 600 700.00 420,000.00
Balance 200 700.00 140,000.00
14 Purchase 1200 650.00 780,000.00
200 700.00 140,000.00
Balance
1200 650.00 780,000.00
18 Sale 1080 650.00 702,000.00
200 700.00 140,000.00
Balance
120 650.00 78,000.00
30 Purchase 800 725.00 580,000.00
200 700.00 140,000.00
Balance 120 650.00 78,000.00
800 725.00 580,000.00
798,000.00

C. Weighted Average
UNITS UNIT PRICE TOTAL COST
Dec 1 Purchase 800 700.00 560,000.00
8 Sale 600 700.00 420,000.00
Balance 200 700.00 140,000.00
14 Purchase 1200 650.00 780,000.00
Balance 1400 657.14 920,000.00
18 Sale 1080 657.14 709,711.20
Balance 320 657.14 210,288.80
30 Purchase 800 725.00 580,000.00
Balance 1120 705.62 790,288.80
Problem 2

Answer: Slate Truck Company should sell the trucks with the highest unit price. This will result to a high Cost
of Goods Sold which in turn will minimize Gross Profit and the Net Income. The Cost of Goods Sold
that will be reflected in the Income Statement will be P12,500,000.00(5*2,500,000.00)

Problem 3

Income Statement Green Lewis

Sales 25,650.00 25,650.00

Cost Of Goods Sold
Beg. Inventory - -
Purchases 21,900.00 21,900.00
Total Goods Available for Sale 21,900.00 21,900.00
End. Inventory 4,950.00 16,950.00 3,900.00 18,000.00
Gross Profit 8,700.00 7,650.00
Selling Expenses 2,600.00 1,700.00
Net Income 6,100.00 5,950.00

*Computation of End. Inventory

UNITS UNIT PRICE COST FIFO LIFO

200 15 3,000.00 50 units @ P19 950.00 200 units @ P15 3,000.00
300 18 5,400.00 200 units @ P20 4,000.00 50 units @ P18 900.00
500 19 9,500.00 4,950.00 3,900.00
200 20 4,000.00
21,900.00

Green's business resulted to a higher income than Lewis' business. The difference in their net incomes
is because of the difference between the inventory valuation method used by the two business.
Due to the price concession given by the distributors, FIFO method will lead to a lower Cost of Goods Sold
which will result to a higher Gross Profit and Net Income. Even though Green's selling expense is
higher than lewis', Green's business still generated the most profit.