A company purchases inventory during the year in 4 batches, with unit and price
ID: 2455991 • Letter: A
Question
A company purchases inventory during the year in 4 batches, with unit and price amounts shown below:
Batch 1 – 9,500 units @ $2.10 per unit
Batch 2 – 4,300 units @ 2.08 per unit
Batch 3 – 3,600 units @ 2.04 per unit
Batch 4 – 7,200 units @ 2.01 per unit
10,800 units were sold after Batch 2 was purchased, while 3,400 units were sold after Batch 3 was purchased.
Required:
Calculate cost of goods sold and ending inventory under the FIFO method, using the perpetual inventory system.
Calculate cost of goods sold and ending inventory under the FIFO method, using the periodic inventory system
Calculate cost of goods sold and ending inventory under the lifo method, using the perpetual inventory system
Calculate cost of goods sold and ending inventory under the lifo method, using the periodic inventory system
If prices were increasing, moving from FIFO to LIFO would lead to: cogs, ending inventory and net income
Explanation / Answer
Cost of goods sold and ending inventory under the FIFO method, using the perpetual inventory system
Cost of goods sold and ending inventory under the FIFO method, using the periodic inventory system
Cost of goods sold and ending inventory under the lifo method, using the perpetual inventory system
Cost of goods sold and ending inventory under the lifo method, using the periodic inventory system
If price were increasing moving from FIFO to LIFO would lead to:
COGS = The COGS will increase as the price of the last inventory purchased would be more than the first inventory purchased.
Ending inventory : Cost of ending inventory will be less if LIFO is moving from FIFO
Net Income of the firm will decrease as the cost of goods sold will be high.
Particulars Number of units Cost per unit Cost = Units x cost Purchase Batch 1 9,500 $ 2.10 $ 19,950 Purchase Batch 2 4,300 $ 2.08 $ 8,944 Sales of 9500 Units from batch 1 9,500 $ 2.10 $ (19,950) Sales of 1300 Units from batch 2 1,300 $ 2.08 $ (2,704) Purchase Batch 3 3,600 $ 2.04 $ 7,344 Sales of 3000 Units from batch 2 3,000 $ 2.08 $ (6,240) Sales of 400 Units from batch 3 400 $ 2.04 $ (816) Purchase Batch 4 7,200 $ 2.01 $ 14,472 Ending Inventory = Sum of all the costs $ 21,000 Cost of goods sold = Sum of negative balance $ 29,710Related Questions
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