Dimaandal, Ivan Lorenz A.

Chapter 7 Problem 6
BSA2-G1

7. Gross method vs. Net method

Gross method Net method
January 1, 20x1
Purchases 144,000* Purchases 136,800*
Accounts payable 144,000 Accounts payable 136,800
*(200,000 x 80% x 90%) *(₱200,000 x 80% x 90% x 95%)
*(200,000 x 80% x 90% x 95%)
January 10, 20x1
Accounts payable* 72,000 Accounts payable* 68,400
Purchase discounts 3,600 Cash 68,400
(144,000 x ½ x 5%) *(136,800 x ½)
Cash** 68,400
*(144,000 x ½)
**(144,000 x ½ x 95%)

Accounts payable* 72,000 Accounts payable 68,400

Cash 72,000 Purchase discount lost 3,600
*(144,000 x ½) Cash 72,000

8. Cost formulas
Solutions:
Requirement (a): FIFO Periodic
Ending inventory, in units = (3,000 + 2,250 + 10,200 – 2,700 – 7,200) = 5,550
Units Unit cost Total cost
Ending inventory in units 5,550
Allocation to latest purchases:
January 26 2,250 20.60 46,350
January 6 (balance) 3,300 21.50 70,950

Ending inventory in
117,300

pesos
Ending inventory in
pesos
Ending inventory in
pesos
Ending inventory in pesos
 TGAS (58,650 + 219,300 + 46,350) 324,300
Less: Ending inventory in pesos (117,300)
COGS 207,000

Requirement (b): FIFO Perpetual

Answers are the same with FIFO Periodic.

Requirement (c): Weighted Average Cost Periodic

Weighted average unit cost = TGAS in pesos/TGAS in units
Weighted average unit cost = (58,650 + 219,300 + 46,350) = 324,300/(3,000 + 10,200 + 2,250) = 15,450
Weighted average unit cost = 20.99

Ending inventory in units 5,550

Multiply by: Wtd. Ave. Cost 20.99
Ending inventory in pesos 116,494.50

TGAS in pesos 324,300

Less: Ending inventory in pesos (116,494.50)
COGS 207,805.50

Requirement (d): Weighted Average Cost Perpetual

Units Unit cost Total cost
Balance at January 1, 20x2 3,000 19.55 58,650
January 6, 20x2 10,200 21.5 219,300
TGAS 13,200 21.06 277,950
January 7, 20x2 (2,700) 21.06 (56,862)
January 26, 20x2 2,250 20.6 46,350
TGAS 12,750 20.98 267,438
January 31, 20x2 (7,200) 20.98 (151,056)
Ending inventory 5,550 116,382

COGS = (56,862 + 151,056) = 207,918