Determine the cost of goods sold and ending inventory amounts by the average, FIFO and LIFO cost methods.

Question

580 viewsOctober 7, 2016

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Darshita 6.14K October 7, 2016 0 Comments

Que-29

Beg Inv	1-Oct	100	$76.00	$7,600.00

Purchases	3-Oct	200	$81.00	$16,200.00
	12-Oct	90	$82.00	$7,380.00
	24-Oct	240	$85.00	$20,400.00


Sold		500	????	?????


Ending Inventory		130	????	????

a)Determine the cost of goods sold and ending inventory amounts by the average, FIFO and LIFO cost methods. Round average cost per unit to 3 decimal places, and round all other amounts to the nearest dollar. (20 points)

b)Explain why cost of goods sold is highest under LIFO. Be specific. (5 points)

c)Prepare Spice’s income statements for October under all three inventory methods. Report gross profit. Operating expenses totaled $10,000. The income tax rate is 40%. Skeleton income statement follows: (5 points)

1 Answer

score 0 · Answer 1 · 2016-10-07T12:20:40+00:00

Answer

	Cost Of Good Sold	Ending Inventory

FIFO	40530	11050
LIFO	41550	10030
Wighted Avg	40936.5	10643.49

2

b)Explain why cost of goods sold is highest under LIFO. Be specific. (5 points)

Cost of goods is highest under LIFO becase LIFO consider the last comes quantity as first goes out from the inventory and the cost of last came quantity is higher then the earlier came quantity

3

Spice’s income statements for October under all three inventory methods.

Note : Here selling price is not given and without it, Income statement could not be prepared

Working Notes for the above answer

FIFO
	Beginig And Purchase			Sale			Ending
Date	Unit	Cost	Total	Unit	Cost	Total	Unit	Cost	Total
1-Oct	100	76	7600				100	76	7600

3-Oct	200	81	16200
12-Oct	90	82	7380
24-Oct	240	85	20400				100	76	7600
							200	81	16200
							90	82	7380
							240	85	20400

				100	76	7600
				200	81	16200
				90	82	7380
				110	85	9350
							130	85	11050

Total				500		40530	130		11050

LIFO
	Beginig And Purchase			Sale			Ending
Date	Unit	Cost	Total	Unit	Cost	Total	Unit	Cost	Total
1-Oct	100	76	7600				100	76	7600

3-Oct	200	81	16200
12-Oct	90	82	7380
24-Oct	240	85	20400				100	76	7600
							200	81	16200
							90	82	7380
							240	85	20400




				240	85	20400
				90	82	7380
				170	81	13770
							100	76	7600
							30	81	2430
Total				500		41550	130		10030

Wighted Avg
	Beginig And Purchase			Sale			Ending
Date	Unit	Cost	Total	Unit	Cost	Total	Unit	Cost	Total
1-Oct	100	76	7600				100	76	7600

3-Oct	200	81	16200
12-Oct	90	82	7380
24-Oct	240	85	20400				630	81.87302	51580

				500	81.873	40936.5	130	81.873	10643.49

Total				500		40936.5	130		10643.49

1 Answer

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