1. A inc uses the LIFO cost flow assumption to value inventory. Inventory for A
ID: 2517279 • Letter: 1
Question
1. A inc uses the LIFO cost flow assumption to value inventory. Inventory for A on 1/2/2001 was 100 units at a LIFO cost of $ 25/unit. During the first quarter of 2001, 200 units were purchased costing an average of $ 40 per unit, and sales of 265 units at a retail price of $ 50 per unit were made. Assuming A expects to replace the units of beginning inventory sold before year-end at a cost of $41, what is the amount of cost of good sold for the quarter ended 3/31/2001.
What is the correct journal entry to record COGS at the end of the first quarter? Show steps
Answer: Dr cost of good sold 9625
Dr excess of replacement cost over historical cost of LIFO liquidation 1040
Cr inventory 10665
2. A purchases raw material from its foreign supplier B on May 8, payment of 2000000foreign curenct units FC is due in 30 days. May 31 is A ‘s fiscal year-end. The pertinent exchange rate were as followes:
May 8 spot rate $1.25
May 31 spot rate 1.26
Jun 7 1.20
For what amount should A account payable be credited on May 8? Show steps
How much foreign exchange gain or loss should A record on May 31? show sheps
Answers: 2500000 and 20000 loss
Explanation / Answer
1a. Cost of goods sold for Qtr Jan to march 2001 =
Purchased during qtr (sold first on basis of lifo) = 400*200 = 8000
add. opening Inventory( sold thereafter as per lifo) = 65*25 = 1625
Total = 9625
1b. Cost of Replacement of opening inventory sold i.e 65 units
(41-25)*65 = 1040
1c. Journal Entry
Dr. cost of goods sold 9625
Dr. Excess of replacement cost over historical cost 1040
Cr. Inventory 10665
2a. Amount to be recorded on may 8 = 1.25*2000000 = 2500000
2b. amount of loss to be recorded on may 31 = (1.26-1.25)*2000000 = 20000 loss
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