Mojo Industries tracks the number of units purchased and sold throughout each ac
ID: 2425585 • Letter: M
Question
Mojo Industries tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the time of each sale, as if it uses a perpetual inventory system. Assume its accounting records provided the following information at the end of the accounting period, January 31. The inventory's selling price is $11 per unit. Calculate the cost of goods sold and ending inventory for Mojo Industries assuming it applies the LIFO cost method perpetually at the time of each sale. Does the use of a perpetual inventory system result in a higher or lower cost of goods sold than the periodic inventory system when costs are rising? Lower Cost of Goods Sold Higher Cost of Goods SoldExplanation / Answer
Perpetual system LIFO cost flow
Date
Transaction
Quantity
Price/cost
Purchase
Sale
Closing
1/1
Beginning inventory
290
4.5
290*4.5
10/1
Sale
220
4.5
220*4.5
220*4.5
70*4.5
12/1
Purchase
330
5
330*5
70*4.5
330*5.0
17/1
Sale
170
5
170*5
70*4.5
160*5
26/1
Purchase
90
6
90*6
70*4.5
160*5
90*6
Ending inventory = 70*4.58 + 160*5 + 90*6 = 1660.6
Cost of goods sold under perpetual system = [(220*4.5 + 170*5)= 1840
1-b = Lower cost of goods sold
Date
Transaction
Quantity
Price/cost
Purchase
Sale
Closing
1/1
Beginning inventory
290
4.5
290*4.5
10/1
Sale
220
4.5
220*4.5
220*4.5
70*4.5
12/1
Purchase
330
5
330*5
70*4.5
330*5.0
17/1
Sale
170
5
170*5
70*4.5
160*5
26/1
Purchase
90
6
90*6
70*4.5
160*5
90*6
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