On December 1, Discount Electronics Ltd. has three DVD players left in stock. Al

Question

On December 1, Discount Electronics Ltd. has three DVD players left in stock. All are identical, all are priced to sell at $64. One of the three DVD players left in stock, with serial #1012, was purchased on June 1 at a cost of $40. Another, with serial #1045, was purchased on November 1 for $34. The last player, serial #1056, was purchased on November 30 for $33.

(a) Calculate the cost of goods sold using the FIFO periodic inventory method assuming that two of the three players were sold by the end of December, Discount Electronics' year-end.



(b) If Discount Electronics used the specific identification method instead of the FIFO method, what would Bargain's cost of goods sold be if the company wished to minimize earnings?



If Discount Electronics used the specific identification method instead of the FIFO method, what would Bargain's cost of goods sold be if the company wished to maximize earnings?

Explanation / Answer

Specific Inventory Method is an inventory method that considers the sale and cost of each item specifically that consider. a) FIFO CGS $40+$34=$74 b)Specific Inventory Method will be the same as FIFO . CGS =max when 40+34=74 and it would minimize earning. To maximize earnigs CGS has tobe at minimum. So, Specific Inventory Method wil be the same as LIFO $33+$34=$67

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