EXERCISE 8-2 (1015 minutes)

Inventory per physical count..................................................

Goods in transit to customer, f.o.b. destination...................
Goods in transit from vendor, f.o.b. shipping point.............
Inventory to be reported on balance sheet...........................

$441,000
+ 33,000
+ 51,000
$525,000

The consigned goods of $61,000 are not owned by Garza and

were properly excluded.
The goods in transit to a customer of $46,000, shipped f.o.b.
shipping point, are properly excluded from the inventory
because the title to the goods passed when they left the seller
(Garza) and therefore a sale and related cost of goods sold
should be recorded in 2012.
The goods in transit from a vendor of $73,000, shipped f.o.b.
destination, are properly excluded from the inventory because
the title to the goods does not pass to Garza until the buyer
(Garza) receives them.
EXERCISE 8-9 (1525 minutes)
(a)

Jan. 4

Jan. 11

Jan. 13

Jan. 20

Jan. 27

Jan. 31

Accounts Receivable............................
Sales Revenue (80 X $8)..............

640

Purchases ($150 X $6.50).....................

Accounts Payable........................

975

Accounts Receivable............................
Sales Revenue (120 X $8.75).......

1,050

Purchases (160 X $7)............................

Accounts Payable........................

1,120

Accounts Receivable............................
Sales Revenue (100 X $9)............

900

Inventory ($7 X 110)..............................

Cost of Goods Sold...............................

770
1,925*

640

975

1,050

1,120

900

Purchases ($975 + $1,120)..........

Inventory (100 X $6).....................

2,095
600

*($600 + $2,095 $770)

(b)

Sales Revenue ($640 + $1,050 + $900)...................

Cost of goods sold...................................................
Gross profit...............................................................

(c)

Jan. 4

Jan. 11

Jan. 13

Jan. 20

Jan. 27

(d)

$2,590
1,925
$ 665

Accounts Receivable.............................
Sales Revenue (80 X $8)..............

640

Cost of Goods Sold...............................

Inventory (80 X $6)........................

480

Inventory.................................................
Accounts Payable (150 X $6.50)...

975

Accounts Receivable.............................
Sales Revenue (120 X $8.75).......

1,050

Cost of Goods Sold...............................

Inventory ([(20 X $6) +
(100 X $6.50)]..............................

770

Inventory.................................................
Accounts Payable (160 X $7).......

1,120

Accounts Receivable.............................
Sales Revenue (100 X $9)............

900

Cost of Goods Sold...............................

Inventory [(50 X $6.50) +
(50 X $7)].....................................

675

Sales revenue...........................................................
Cost of goods sold
($480 + $770 +$675)...............................................
Gross profit...............................................................

640

480

975

1,050

770

1,120

900

675
$2,590
1,925
$ 665

PROBLEM 8-4

(a)

Purchases
Total Units
April 1 (balance on hand)
April 4
April 11
April 18
April 26
April 30
Total units
Total units sold
Total units (ending inventory)

Sales
Total Units
100
400
300
200
600
200
1,800
1,450
350

April 5
April 12
April 27
April 28
Total units

300
200
800
150
1,450

Assuming costs are not computed for each withdrawal:

1.

2.

First-in, first-out.
Date of Invoice
April 30
April 26

No. Units
200
150

Unit Cost
$5.80
5.60

Total Cost
$1,160
840
$2,000

Last-in, first-out.
Date of Invoice
April 1
April 4

No. Units
100
250

Unit Cost
$5.00
5.10

Total Cost
$ 500
1,275
$1,775

PROBLEM 8-4 (Continued)

3.

Average cost.
Cost of Part X available.
Date of Invoice
No. Units
April 1
100
April 4
400
April 11
300
April 18
200
April 26
600
April 30
200
Total Available
1,800

Unit Cost
$5.00
5.10
5.30
5.35
5.60
5.80

Total Cost
$ 500
2,040
1,590
1,070
3,360
1,160
$9,720

Average cost per unit = $9,720 1,800 = $5.40.

Inventory, April 30 = 350 X $5.40 = $1,890.
(b) Assuming costs are computed for each withdrawal:
1.

First-in, first out.

The inventory would be the same in amount as in part
(a), $2,000.

PROBLEM 8-4 (Continued)

2.

Last-in, first-out.
Purchased
Date

No. of
units

Unit
cost

April 1

100

April 4

400

April 12

No. of
units

Unit
cost

$5.00

100

$5.00

5.10

100

5.00

400

5.10

100

5.00

100

5.10

100

5.00

100

5.10

300

5.30

100

5.00

300
300

Balance*
No. of
units

April 5
April 11

Sold
Unit
cost

$5.10

5.30

200

5.30

Amount
$

500
2,540
1,010

2,600

April 18

April 26

200

600

5.35

5.60

April 27
800

600 @

5.60

200 @

5.35

100

5.10

100

5.30

100

5.00

100

5.10

100

5.30

200

5.35

100

5.00

100

5.10

100

5.30

200

5.35

600

5.60

100

5.00

100

5.10

100
April 28
150
April 30

200

5.80

2,610

5,970

1,540

5.30

100 @

5.30

100

5.00

50 @

5.10

50

5.10

100

5.00

50

5.10

200

5.80

Inventory, April 30 is $1,915.

*The balance on hand is listed in detail after each
transaction.

1,540

755

1,915

PROBLEM 8-4 (Continued)

3.

Average cost.
Purchased
Date

No. of
units

Unit
cost

April 1

100

$5.00

April 4

400

5.10

April 5
April 11

Sold
No. of
units

300
300

Unit
cost

$5.0800

5.30

April 12

200

5.2120

Balance
No. of
units

Unit
cost*

Amount

100

$5.0000

$ 500.00

500

5.0800

2,540.00

200

5.0800

1,016.00

500

5.2120

2,606.00

300

5.2120

1,563.60

April 18

200

5.35

500

5.2672

2,633.60

April 26

600

5.60

1,100

5.4487

5,993.60

April 27

800

5.4487

300

5.4487

1,634.72

April 28

150

5.4487

150

5.4487

817.33

350

5.6495

1,977.33

April 30

200

5.80

Inventory, April 30 is $1,977.33

*Four decimal places are used to minimize rounding
errors.