| II. The inventory records of the Riedel Company showed Result Reviewer the fol
ID: 2406777 • Letter: #
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| II. The inventory records of the Riedel Company showed Result Reviewer the following transactions for the fiscal period ended June 30. Units 500 Cost/unit $3.20 June 1 June 3 June 15 June 22 June 30 Inventory Purchases 400 Sale @$10.20 200 Sale@ $10.50 500 Purchases 3.40 400 3.70 Assuming periodic inventory system and LIFO is used. Please compute 1. COGS(5 marks) 2. Ending inventory(5 marks)- Assuming perpetual inventory system and LIFO is used. Please compute: 1. COGS(5 marks) 2. Ending inventory(5 marks) II Two independent companies A and B, each owna machine and they agree to an exchange in which no cash changes hands, neither company is a dealer. The following Result ReviewerExplanation / Answer
Periodic Inventory system: Under periodic inventory system inventory is ascertained only at the end of the period LIFO inventory system implies Last in first out.It means that goods purchased last are sold first. 1 Cost of goods sold Total units sold=200+500=700 units Under LIFO goods purchased last are sold first The latest purchase for the period is on June 30. Hence,sold units will be first exhuasted from June 30 purchase and balance from June 3 purchase Cost of goods sold=(400*3.70)+(300*3.40)=$ 2500 2 Ending inventory Ending inventory in units=Beginning inventory+Purchases-Sales=500+400+400-200-500=600 units Under LIFO goods purchased last are sold first.Hence,inventory will consist of old purchase Hence,first 500 units will be exhuasted from the beginning inventory and balance will be from the June 3 purchase Inventory value=(500*3.20)+(100*3.40)=$ 1940 Perpetual inventory: Under perpetual inventory system inventory is updated as soon as any purchase or sale happens. LIFO inventory system implies Last in first out.It means that goods purchased last are sold first. Following table shows perpetual inventory updates for this problem: Date Purchases Sales Balance Unit Rate Unit*Rate Unit Rate Unit*Rate Unit Rate Unit*Rate June 1. 500 3.2 1600 June 3. 400 3.4 1360 500 3.2 1600 400 3.4 1360 June 15. 200 3.4 680 500 3.2 1600 200 3.4 680 June 22. 200 3.4 680 200 3.2 640 300 3.2 960 June 30. 400 3.7 1480 200 3.2 640 400 3.7 1480 Total Cost of goods sold 2320 1 Cost of goods sold=$ 2320 2 Inventory consist of 400 units @ $ 3.7 1480 200 units @ $ 3.2 640 Value of inventory= 2120
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