Futuristic Electronic Center began December with 100 units of merchandise invent
ID: 2342084 • Letter: F
Question
Futuristic Electronic Center began December with 100 units of merchandise inventory that cost $78 each. During December, the store made the following purchases: E (Click the icon to view the purchases.) Futuristic uses the periodic inventory system, and the physical count at December 31 indicates that 130 units of merchandise inventory are on hand. Read the requirements Requirement 1. Determine the ending merchandise inventory and cost of goods sold amounts for the December financial statements using the FIFO, LIFO, and weighted-average inventory costing methods FIFO Ending inventory Cost of goods soldExplanation / Answer
Answer
FIFO
Cost of Goods available for sale
Cost of Goods Sold
Ending Inventory
Units
Cost/unit
COG for sale
Units sold
Cost/unit
COGS
Units
Cost/unit
Ending inventory
Beginning Inventory
100
$ 78.00
$ 7,800.00
100
$ 78.00
$ 7,800.00
0
$ 78.00
$ -
Purchases:
03-Dec
40
$ 80.00
$ 3,200.00
10
$ 80.00
$ 800.00
30
$ 80.00
$ 2,400.00
12-Dec
60
$ 82.00
$ 4,920.00
0
$ 82.00
$ -
60
$ 82.00
$ 4,920.00
18-Dec
40
$ 94.00
$ 3,760.00
0
$ 94.00
$ -
40
$ 94.00
$ 3,760.00
TOTAL
240
$ 19,680.00
110
$ 8,600.00
130
$ 11,080.00
LIFO
Cost of Goods available for sale
Cost of Goods Sold
Ending Inventory
Units
Cost/unit
COG for sale
Units sold
Cost/unit
COGS
Units
Cost/unit
Ending inventory
Beginning Inventory
100
$ 78.00
$ 7,800.00
$ 78.00
$ -
100
$ 78.00
$ 7,800.00
Purchases:
0
$ -
$ -
03-Dec
40
$ 80.00
$ 3,200.00
10
$ 80.00
$ 800.00
30
$ 80.00
$ 2,400.00
12-Dec
60
$ 82.00
$ 4,920.00
60
$ 82.00
$ 4,920.00
0
$ 82.00
$ -
18-Dec
40
$ 94.00
$ 3,760.00
40
$ 94.00
$ 3,760.00
0
$ 94.00
$ -
TOTAL
240
$ 19,680.00
110
$ 9,480.00
130
$ 10,200.00
Average Method
Cost of Goods available for sale
Cost of Goods Sold
Ending Inventory
Units
Cost/unit
COG for sale
Units sold
Cost/unit
COGS
Units
Cost/unit
Ending inventory
Beginning Inventory
100
$ 78.00
$ 7,800.00
Purchases:
0
$ -
$ -
03-Dec
40
$ 80.00
$ 3,200.00
12-Dec
60
$ 82.00
$ 4,920.00
18-Dec
40
$ 94.00
$ 3,760.00
TOTAL
240
$ 82.00
$ 19,680.00
110
$ 82.00
$ 9,020.00
130
$ 82.00
$ 10,660.00
FIFO
LIFO
Weighted Average Method
Sales Revenue
$ 27,000.00
$ 27,000.00
$ 27,000.00
(-) Cost of Goods Sold (as calculated above)
$ 8,600.00
$ 9,480.00
$ 9,020.00
Gross Profits
$ 18,400.00
$ 17,520.00
$ 17,980.00
-LIFO will give lowest Income taxes because under this method as the prices are on increasing trend, the cost of goods sold is higher and Gross profits are lower. This will lead to lower Net Income before taxes and hence, Income tax will be LOW.
-FIFO will give highest Income taxes because under this method as the prices are on increasing trend, the cost of goods sold is lowest and Gross profits are higher. This will lead to higher Net Income before taxes and hence, Income tax will be HIGH.
FIFO
Cost of Goods available for sale
Cost of Goods Sold
Ending Inventory
Units
Cost/unit
COG for sale
Units sold
Cost/unit
COGS
Units
Cost/unit
Ending inventory
Beginning Inventory
100
$ 78.00
$ 7,800.00
100
$ 78.00
$ 7,800.00
0
$ 78.00
$ -
Purchases:
03-Dec
40
$ 80.00
$ 3,200.00
10
$ 80.00
$ 800.00
30
$ 80.00
$ 2,400.00
12-Dec
60
$ 82.00
$ 4,920.00
0
$ 82.00
$ -
60
$ 82.00
$ 4,920.00
18-Dec
40
$ 94.00
$ 3,760.00
0
$ 94.00
$ -
40
$ 94.00
$ 3,760.00
TOTAL
240
$ 19,680.00
110
$ 8,600.00
130
$ 11,080.00
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