Question

Greg's Bicycle Shop has the following transactions related to its top-selling Mongoose mountain bike for the month of March 2015. Greg's Bicycle Shop uses a periodic inventory system Date Transactions Units Cost per Unit Total Cost March 1 Beginning inventory 20 $250 $ 5,000March 5 Sale ($400 each) 15March 9 Purchase 10 270 2,700March 17 Sale ($450 each) 8March 22 Purchase 10 280 2,800March 27 Sale ($475 each) 12March 30 Purchase 9 300 2,700$13,2001. Calculate ending inventory and cost of goods sold at March 31, 2015, using the specific identification method. The March 5 sale consists of bikes from beginning inventory, the March 17 sale consists of bikes from the March 9 purchase, and the March 27 sale consists of four bikes from beginning inventory and eight bikes from the March 22 purchase.2. Using FIFO, calculate ending inventory and cost of goods sold at March 31, 2015.3. Using LIFO, calculate ending inventory and cost of goods sold at March 31, 2015.4. Using weighted-average cost, calculate ending inventory and cost of goods sold at March 31, 2015.5. Calculate sales revenue and gross profit under each of the four methods. (Round weighted-average cost amounts to 2 decimal places.)6. If Greg’s Bicycle Shop chooses to report inventory using LIFO instead of FIFO, record the LIFO adjustment. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

The specific identification method is used to calculate the ending inventory and cost of goods sold based on the actual cost of each item. In this case, the ending inventory at March 31, 2015, would be $2,560, and the cost of goods sold would be $14,590.

Step-by-step explanation:

The specific identification method assigns the actual cost of each item in the inventory to the cost of goods sold and ending inventory. Based on the given information, we can calculate the ending inventory and cost of goods sold for March 31, 2015, using this method:

1. For the ending inventory, we sum the costs of the remaining items in the inventory at the unit cost mentioned in the table. In this case, we have 4 bikes from the beginning inventory and 6 bikes from the March 22 purchase, so the ending inventory would be (4 x $250) + (6 x $280) = $2,560.
2. For the cost of goods sold, we sum the costs of the bikes sold, which are as follows: (15 - 4) x $250 + (8 - 6) x $270 + 12 x $300 = $14,590.

Therefore, the ending inventory at March 31, 2015, would be $2,560, and the cost of goods sold would be $14,590.

Answer 2

Inventory valuation methods such as Specific Identification, FIFO, LIFO, and weighted-average cost impact the calculation of ending inventory and COGS in different ways, which in turn affect sales revenue and gross profit of a business.

Step-by-step explanation:

Calculating the ending inventory and cost of goods sold (COGS) involves different methodologies in inventory accounting, such as Specific Identification, FIFO, LIFO, and weighted-average cost. For Specific Identification, the ending inventory consists of the cost of unsold units specifically identified, resulting in an accurate but not always practical method. Using FIFO, the oldest inventory costs are used for COGS, leading to a different calculation. Conversely, LIFO uses the newest costs, affecting both ending inventory and COGS differently. The weighted-average cost method calculates COGS and ending inventory based on the average cost of all units available for sale during the period.

To calculate sales revenue for the month, we sum the total units sold multiplied by their respective sale prices. Gross profit is computed by subtracting COGS from sales revenue for each method. The LIFO adjustment is an accounting entry necessary when companies switch from FIFO to LIFO, reflecting changes in inventory valuation. The specifics of transactions and their impact on financial statements are critical in understanding the financial health of a business.