E6-20 -Determine ending inventory at cost using retail method

Gepetto Shoe Store uses the retail inventory method for its two departments, Women's Shoes and Men's Shoes.
The following information for each department is obtained.

Women's Men's
Item Shoes Shoes
Beginning inventory at cost $25,000 $45,000
Cost of goods purchased at cost 110,000 136,300
Net sales 178,000 185,000
Beginning inventory at retail 46,000 60,000
Cost of goods purchased at retail 179,000 185,000
Instructions
Compute the estimated cost of the ending inventory for each department under the retail inventory method.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .

Women's Shoes Men's Shoes

Cost Retail Cost Retail
Beginning inventory $25,000 $46,000 $45,000 $60,000
Goods purchased 110,000 179,000 136,300 185,000
Goods available for sale $135,000 225,000 $181,300 245,000
Net sales 178,000 185,000
Ending inventory at retail $47,000 $60,000

Cost-to-retail ratio:
Goods available for sale at cost $135,000 $181,300
Goods available for sale at retail $225,000 $245,000
Cost-to-retail ratio 60% 74%

Estimated cost of ending inventory:

Cost-to-retail ratio 60% 74%
Ending inventory at retail $47,000 $60,000
Estimated cost of ending inventory $28,200 $44,400

After you have completed the requirements of E-20, consider these additional questions.
Answers are on the other tab in this file.
1. Suppose Women's Shoes ending inventory at retail changed to $56,000 . What is the estimated cost of en
2. Suppose Men's Shoes cost of goods purchased at retail changed to 195,000. What is the estimated cost o
s and Men's Shoes.

entory method.
s with a "?" .

e estimated cost of ending inventory?

s the estimated cost of ending inventory?
P6-2A Determine cost of goods sold and ending inventory using FIFO, LIFO, and average-cost with analysis
Express Distribution markets CDs of the performing artist Fishe. At the beginning of October, Express had in beginn
inventory 2,000 of Fishe's CDs with a unit cost of $7. During October, Express made the following purchases of Fish
Oct. 3 2,500 @ $8 Oct. 19 3,000 @ $10
Oct. 9 3,500 @$9 Oct. 25 4,000 @ $11

During October, 10,900 units were sold. Express uses a periodic inventory system.

Instructions
(a) Determine the cost of goods available for sale.
(b) Determine (1) the ending inventory and (2) the cost of goods sold under each of the
assumed cost flow methods (FIFO, LIFO and average cost). Prove the accuracy of the
cost of goods sold under the FIFO and LIFO methods.
(c ) Which cost flow method results in (1) the highest inventory amount for the balance sheet and
(2) the highest cost of goods sold for the income statement?
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .

(a) COST OF GOODS AVAILABLE FOR SALE

Date Explanation Units Unit Cost Total Cost
Oct 1 Beginning inventory 2,000 $7 $14,000
3 Purchase 2,500 8 20,000
9 Purchase 3,500 9 31,500
19 Purchase 3,000 10 30,000
25 Purchase 4,000 11 44,000
Total 15,000 $139,500

(b) (1) FIFO

Ending Inventory
Date Units Unit Cost Total Cost
19 100 $10 $1,000
25 4,000 11 44,000
4,100 $45,000

(b) (2) Cost of Goods Sold

Cost of goods available for sale $139,500
Less: Ending inventory 45,000
Cost of goods sold $94,500

Proof of Cost of Goods Sold

 Date Units Unit Cost Total Cost
1 2,000 $7 $14,000
3 2,500 8 $20,000
9 3,500 9 $31,500
19 3,000 10 $30,000
11,000 $95,500

(b) (1) LIFO

Ending Inventory
Date Units Unit Cost Total Cost
1 2,000 $7 $14,000
3 2,500 8 $20,000
4,500 $34,000

(b) (2) Cost of Goods Sold

Cost of goods available for sale $139,000
Less: Ending inventory 34,000
Cost of goods sold $105,000

Proof of Cost of Goods Sold

Date Units Unit Cost Total Cost
3 2,500 $8 $20,000
9 3,500 9 $31,500
19 3,000 10 $30,000
25 4,000 11 $44,000
13,000 $125,500

(b) (1) AVERAGE COST

Total cost $139,000
Total units available 4,100
Average cost* $37.27
*Round to two decimal points

Ending Inventory
Units Unit Cost Total Cost
4,100 $37.27 $152,818
 Cost of Goods Sold
Cost of goods available for sale $139,000
Less: Ending inventory 45,000
Cost of goods sold $94,000

After you have completed the requirements of P6-2A, consider these additional questions.
Answers are on the other tab in this file.
1. Suppose that the number of units sold increased to 12,000. What is the impact on ending inventory and c
FIFO method is used?
2. Suppose that the number of units sold increased to 12,000. What is the impact on ending inventory and c
LIFO method is used?
3. Suppose that the number of units sold increased to 12,000. What is the impact on ending inventory and c
average cost method is used?
ge-cost with analysis
October, Express had in beginning
he following purchases of Fishe's CDs.

balance sheet and

la in cells with a "?" .

pact on ending inventory and cost of goods sold if the

pact on ending inventory and cost of goods sold if the

pact on ending inventory and cost of goods sold if the

P6-10A Compute gross profit rate and inventory loss using gross profit method
Suzuki Company lost all of its inventory in a fire on December 26, 2015. The accounting records showed the
following gross fprofit data for November and December.
December
November (to 12/26)
Net sales $600,000 $700,000
Beginning inventory 32,000 36,000
Purchases 389,000 420,000
Purchase returns and allowances 13,300 14,900
Purchase discounts 8,500 9,500
Freight-in 8,800 9,900
Ending inventory 36,000 ?

Suzuki is fully insured for fire losses but must prepare a report for the insurance company.
Instructions
(a) Compute the gross profit rate for November.
(b) Using the gross profit rate for November; determine the estimated cost of the inventory
lost in the fire.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .

(a) November
Net Sales $600,000
Cost of goods sold
Beginning inventory $32,000
Purchases $389,000
Less: Purchase returns and allowances 13,300
Purchase discounts 8,500
Add: Freight-in 8,800 211,000
Cost of goods available for sale 243,000
Ending inventory 36,000
Cost of goods sold 279,000
Gross profit $321,000

Gross profit rate

Gross profit $321,000
Net Sales $600,000
Gross profit rate 53.5%

(b) Net Sales $700,000

Less: Estimated gross profit 374,500
 Estimated cost of goods sold $325,500

Beginning inventory $36,000

Purchases $420,000
Less: Purchase returns and allowances $14,900
Purchase discounts 9,500 24,400
Net purchases 395,600
Freight-in 9,900
Cost of goods purchased 405,500
Cost of goods available for sale 441,500
Less: Estimated cost of goods sold 451,400
Estimated inventory lost in fire $9,900

After you have completed the requirements of P6-10A, consider this additional question.
Answers are on the other tab in this file.
1. Suppose that ending inventory in November changed to $45,000. What is the impact on the gross profit
rate and the estimated inventory lost in fire in December?
ting records showed the

the inventory

ula in cells with a "?" .

the impact on the gross profit
P6-2B Determine cost of goods sold and ending inventory using FIFO, LIFO, and average cost with analysis
Xinxin Distribution markets CDs of the performing artist, Carly. At the beginning of March, Xinxin had
in beginning inventory 1,500 Carly CDs with a unit cost of $7. During March Xinxin made the following
purchases of Carly CDs.
March 5 3,000 @$8 March 21 4,000 @ $10
March 13 4,500 @ $9 March 26 2,500 @ $11

During March, 12,000 units were sold. Xinxin uses a periodic inventory system.

Instructions
(a) Determine the cost of goods available for sale.
(b) Determine (1) the ending inventory and (2) the cost of goods sold under each of the assumed cost
flow methods (FIFO, LIFO and average-cost). Prove the accuracy of the cost of goods sold under
the FIFO and LIFO methods. (Round average cost per unit to 3 decimal places.)
(c ) Which cost flow methods results in (1) the highest inventory amount for the balance sheet and
(2) the highest cost of goods sold for the income statement?
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .

(a) COST OF GOODS AVAILABLE FOR SALE

Date Explanation Units Unit Cost Total Cost
1 Beginning inventory 1,500 $7 $10,500
5 Purchase 3,000 8 $24,000
13 Purchase 4,500 9 $40,500
21 Purchase 4,000 10 $40,000
26 Purchase 2,500 11 $27,500
Total 15,500 $142,500

(b) (1) FIFO

Ending Inventory
Date Units Unit Cost Total Cost
21 1,000 $10 $10,000
26 2,500 11 $27,500
3,500 $37,500

(b) (2) Cost of Goods Sold

Cost of goods available for sale $142,500
Less: Ending inventory 37,500
Cost of goods sold $105,000
 Proof of Cost of Goods Sold
Date Units Unit Cost Total Cost
1 1,500 $7 $10,500
5 3,000 8 $24,000
13 4,500 9 $40,500
21 3,000 10 $30,000
12,000 $105,000

(b) (1) LIFO

Ending Inventory
Date Units Unit Cost Total Cost
1 1,500 $7 $10,500
5 3,000 8 $24,000
4,500 $34,500

(b) (2) Cost of Goods Sold

Cost of goods available for sale $142,500
Less: Ending inventory 34,500
Cost of goods sold $108,000

Proof of Cost of Goods Sold

Date Units Unit Cost Total Cost
5 3,000 $8 $24,000
13 4,500 9 $40,500
21 4,000 10 $40,000
26 1,000 11 $11,000
12,500 $115,500

(b) (1) AVERAGE COST

Total cost $142,500
Total units available 3,500
Average cost* $40.71
*Round average cost per unit to 3 decimal places.

Ending Inventory
Units Unit Cost Total Cost
 3,500 $40.71 $142,500

Cost of Goods Sold

Cost of goods available for sale $142,500
Less: Ending inventory 37,500
Cost of goods sold $105,000

After you have completed the requirements of P6-2B, consider these additional questions.
Answers are on the other tab in this file.
1. Suppose that number of units sold decreased to 11,000. What is the impact on ending inventory and cos
FIFO method is used?
2. Suppose that number of units sold increased to 11,000. What is the impact on ending inventory and cost
LIFO method is used?
3. Suppose that number of units sold increased to 11,000. What is the impact on ending inventory and cost
average cost method is used?
cost with analysis
h, Xinxin had
the following

of the assumed cost

goods sold under

alance sheet and

n cells with a "?" .

n ending inventory and cost of goods sold if the

n ending inventory and cost of goods sold if the

n ending inventory and cost of goods sold if the

P6-10B Estimate inventory loss using gross profit method
Liis Company lost 70% of its inventory in a fire on March 25, 2015. The accounting records showed the following
gross profit data for February and March.
March (to
February 3/25)
Net sales $300,000 $250,000
Net purchases 176,800 139,000
Freight-in 3,900 3,000
Beginning inventory 4,500 20,200
Ending inventory 20,200 ?

Liis Company is fully insured for fire losses but must prepare a report for the insurance company.

Instructions
(a) Compute the gross profit rate for the month of February
(b) Using the gross profit rate for February, determine both the estimated total inventory
and inventory loss in the fire in March
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .

(a) February
Net Sales $300,000
Cost of goods sold
Beginning inventory $4,500
Net purchases $176,800
Add: Freight-in 3,900
Cost of goods purchased 15,700
Cost of goods available for sale 3,900
Ending inventory 20,200
Cost of goods sold 16,300
Gross profit $283,700

Gross profit rate

Gross profit $283,700
Net Sales $300,000
Gross profit rate* 94.6%
*Round to 1 decimal point

(b) Net Sales $250,000

Less: Estimated gross profit 236,417
Estimated cost of goods sold $13,583
 Beginning inventory $20,200
Net Purchases $139,000
Ad: Freight-in 3,000
Cost of goods purchased 142,000
Cost of goods available for sale 162,200
Less: Estimated cost of goods sold 159,200
Estimated total cost of ending inventory 37,800
Less: Inventory not lost 50,000
Estimated inventory lost in fire( $3,000

After you have completed the requirements of P6-10B, consider this additional question.
Answers are on the other tab in this file.
1. Suppose that ending inventory in November changed to $25,000. What is the impact on the gross profit
rate and the estimated inventory lost in fire in December?
showed the following

ells with a "?" .

pact on the gross profit