E8-8 AlternativeInventory Methods The Perpetual inventory records of the ParkCom
ID: 2433859 • Letter: E
Question
E8-8 AlternativeInventory Methods The Perpetual inventory records of the ParkCompany indicate the following transactions in the month ofJune:
Units Cost/Unit
Inventory, June1 200 $3.20
Purchases
June3 200 3.50
June17 250 3.60
June24 300 3.65
Sales
June6 300
June21 200
June27 150
Compute the cost of goods sold for June and the inventory at theend of June, using each of the following cost flow assumptions:
1. FIFO
2. LIFO
3. Average cost (round unit coststo 2 decimal places)
4. If Park Company uses IFRS,which of the previous alternatives would be acceptable. Andwhy?
E8-12 Dollar-Value LIFO On January 1,2009, the Sato Company adopted the dollar-value LIFO method ofinventory costing. The company’s ending inventory recordsappear as follow:
Year CurrentCost Index
2009 $40,000 100
2010 56,100 120
2011 58,500 130
2012 70,000 140
Compute the ending inventory for the year 2009, 2010,2011, and 2012, using the dollar-value LIFO method (round to thenearest dollar).
Explanation / Answer
FIFO LIFO Cost of goods sold June 6 Sales - 300 units (200 x $3.20) + (100 x $3.50) $990 (300 x $3.65) $1,095 June 21 Sales - 200 units (100 x $3.50) + (100 x $3.60) $710 200 x $3.60 $720 June 27 Sales - 150 units (150 x $3.60) $540 (50 x $3.60) + (100 x $3.50) $530 Total $2,240 $2,345 FIFO LIFO Cost of goods sold June 6 Sales - 300 units (200 x $3.20) + (100 x $3.50) $990 (300 x $3.65) $1,095 June 21 Sales - 200 units (100 x $3.50) + (100 x $3.60) $710 200 x $3.60 $720 June 27 Sales - 150 units (150 x $3.60) $540 (50 x $3.60) + (100 x $3.50) $530 Total $2,240 $2,345 Average Cost of goods available Inventory, June 1 200 units x $3.20 $640 Purchases - June 3 200 units x $3.50 $700 Purchases - June 17 250 units x $3.60 $900 Purchases - June 24 300 units x $3.65 $1,095 Total Cost of goods available $3,335 Average cost per unit $3,335 / 950 $3.51 Cost of goods sold 650 x $3.51 $2,282 ______________________________________________________________________________4. If Park Company uses IFRS, which of the previousalternatives would be acceptable. And why? ================================================================= The IASB, as part of its Improvements Project, determined thatthe goals of achieving convergence among accounting standards andof promoting uniformity across entities reporting under IFRS wouldbe served by eliminatingthe formerly "allowed alternative" of costing inventories by meansof the last-in, first-out (LIFO)method. This has left the first-in, first-out (FIFO) and the weighted-averagemethods as the only two acceptable costing techniques underIFRS Note : Please as 1 question enabling us to help others aswell. FIFO LIFO Cost of goods sold June 6 Sales - 300 units (200 x $3.20) + (100 x $3.50) $990 (300 x $3.65) $1,095 June 21 Sales - 200 units (100 x $3.50) + (100 x $3.60) $710 200 x $3.60 $720 June 27 Sales - 150 units (150 x $3.60) $540 (50 x $3.60) + (100 x $3.50) $530 Total $2,240 $2,345
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