(TCO 4) Linda’s Lampshades started business on Jan. 1, 2001. They had the follow

Question

(TCO 4) Linda’s Lampshades started business on Jan. 1, 2001. They had the following inventory transactions:

Journals - Jan. 2001

Purchases

Supplier         Date Received         Quantity        Unit Cost       Amount

Donna           01/10/01                110              12.00            1320.00

Thomas         01/15/01                160              14.00            2240.00

Cindy            01/18/01                150              15.00            2250.00

Sales

Customer      Date shipped    Quantity      Sel. Price                Amount         

Norilene        01/16/01         200                  25.00                   5000.00

1.    Calculate the ending inventory, using the perpetual inventory method:

A.     Using FIFO

B.     Using LIFO

C.     Using Average Cost

2.    Prepare the following statement            

Using

                                      FIFO    LIFO        Average Cost

Sales

Cost of Sales          

Gross Profit

(Points : 25)            

Explanation / Answer

1./

A./ CALCULATION OF VALUE OF ENDING INVENTORY USEING FIFO

DATE    PARTICULLAR     QUANTITY     CALCULATION     AMOUNT

01/10/01 PURCHASE 110 110 * $12 $1320

01/15/01   PURCHASE 160 160 * $14 $2240

01/16/01 SELL 200 110 * $12 + 90 * $14 $2580

01/18/01 PURCHASE 150 150 * $15 $2250

ENDING INVENTORY WILL CONSISTS OF 70 UNITS FROM 01/15/01 PURCHASE PLUS150 UNITS FROM 01/18/01 PURCHASE

ENDING INVENTORY=70 * $14 + 150 * $15

=$3230

B./ CALCULATION OF VALUE OF ENDING INVENTORY USEING LIFO

DATE    PARTICULLAR     QUANTITY     CALCULATION     AMOUNT

01/10/01 PURCHASE 110 110 * $12 $1320

01/15/01   PURCHASE 160 160 * $14 $2240

01/16/01 SELL 200 160 * $14 + 40 * $12 $2720

01/18/01 PURCHASE 150 150 * $15 $2250

ENDING INVENTORY WILL CONSISTS OF 70 UNITS FROM 01/10/01 PURCHASE PLUS150 UNITS FROM 01/18/01 PURCHASE

ENDING INVENTORY=70 * $12 + 150 * $15

=$3090

C./ CALCULATION OF VALUE OF ENDING INVENTORY USEING AVERAGE COST

DATE    PARTICULLAR     QUANTITY     CALCULATION     AMOUNT

01/10/01 PURCHASE 110 110 * $12 $1320

01/15/01   PURCHASE 160 160 * $14 $2240

TOTAL =270 =$3560

AVERAGE COST OF ONE UNIT= TOTAL COST / TOTAL UNIT

=$3560 / 270

=$13.19

DATE    PARTICULLAR     QUANTITY     CALCULATION     AMOUNT

01/16/01 SELL 200 200 * $13.19 $2638

01/18/01 PURCHASE 150 150 * $15 $2250

AVERAGE COST OF ONE UNIT= TOTAL COST / TOTAL UNIT

=$3560 + $2250 /420

=$13.83

ENDING INVENTORY=220 * 13.83

=$3043

2./

   FIFO     LIFO   AVERAGE COST

SALES $5000 $5000 $5000

COST OF SALES ($2580) ($2720) ($2638)

GROSS PROFIT $2420 2280 $2362

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