Records of the Genesis Corporation reveal the followinginformation about invento

Question

Records of the Genesis Corporation reveal the followinginformation about inventory during the year.

January1                     Beginninginventory          1,000units            @ $ 10 March15                     Purchase ofinventory         3,500units            @ $ 12 July21                         Sale ofinventory               4,000 units

September12              Purchase ofinventory         1,600units             @ $ 14 October31                 Sale ofinventory                 1,200 units

The company’s accountant is trying to decide whether todetermine Cost of Goods Sold using the perpetual inventory system(calculating Cost of Goods Sold after every sale) or the periodicinventory system (calculating Cost of Goods Sold at the end of theyear only). Assume the company uses the LIFO method for inventorycosting.

Using the information given above, answer each of the followingquestions.

A.     How many units have been sold? Howmany units remain in ending inventory?

B.     What is Cost of Goods Soldusing the perpetual method? The periodic method? What is the costof ending inventory for each method?

C.     Is there a difference in net incomefor each method? Why? (Assume for purposes of this question thatSales Revenue is $ 85,000 and all other expenses are $ 5,600.)

Explanation / Answer

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