Eaton Electronics uses a periodic inventory system. On March 31, Eaton has two p

Question

Eaton Electronics uses a periodic inventory system. On March 31, Eaton has two plasma TVs on hand at a cost of $1,500 each (serial numbers 11534892 and 11534894). In April, the company purchases four more identical TVs from Toshiba for $1,450 each (serial numbers 11542631 through 11542634). In May, the company purchases five more identical TVs for $1,600 each (serial numbers 11550964 through 11550968). In June, Eaton sells two of these TVs (serial numbers 11534894 and 11542631). There were no additional purchases or sales during the remainder of the year. Use the information above to answer the following question. Eaton Electronics reports $3000 as the cost of goods sold. Eason Electronics is using the: a: LIFO method b: specific identification method c: FIFO method d: weighed average cost method

Explanation / Answer

a) LIFO Method stands for Last In First Out. In this method the last stock is sold out first.

31st March

Openning Balance

(2 units @ 1500)

3000

3000

Purchased

(4 units @ 1450)

Purchased

(5 units @ 1600)

Sales

1 unit @ 1600

1 unit @ 1500

1600

1500

(3100)

Working Notes: Serial Number 11542631( @ 1600) is sold first and Serial Number 11534894( @ 1500) is sold after that because stock purchased last is to be sold first under this method.

b) Specific Identification Method is used to find out the ending inventory cost. It involves detail count of inventory.

Openning Balance

2 units @ 1500

30th April

c) FIFO stands for First In First Out. In this method stock purchased first is sold out first.

Openning Balance

2 Units @ 1500

Purchases

4 Units @1450

Purchases

5 Uints @1600

Sales

1 unit @1500

1 unit @1600

(1500)

(1600)

15300

13700

Working Notes: Serial Number 11534849( @ 1500) is sold first and Serial Number 11542631( @ 1600) is sold after that because stock purchased first is to be sold first under this method.

d) Weighed Average Cost Method: In this method average cost of inventory is considered at the time of sales.

Openning Balance

2 units @ 1500 = 3000

Working Notes: (3000+5800+8000)/11=1527.27

Date Particulars Amount Amount

31st March

Openning Balance

(2 units @ 1500)

3000

3000

30th April

Purchased

(4 units @ 1450)

5800 8800 31st May

Purchased

(5 units @ 1600)

8000 16800 30th June

Sales

1 unit @ 1600

1 unit @ 1500

1600

1500

(3100)

13,700

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.