1 of 1 ACCT:2100 Spring 2018 Chapter 7 Take-Home Quiz The following information
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Question
1 of 1 ACCT:2100 Spring 2018 Chapter 7 Take-Home Quiz The following information shows Fleet Feet, Inc.'s purchase and sale of high performance socks throughout the year: Cost per Unit Units Beginning sock inventory at January 1, 2017 500 Purchases on Account: March 1 June November 750 800 650 S11.25 11.60 S12.15 Selling Price 16.10 Units Sales on Account: February 28 April 30 October 400 675 S17.05 Reguired: . Assuming Fleet Feet uses a periodie inventory system, Calculate Fleet Feet's cost of goods sold and ending sock inventory at December 31, 2017 under the FIFO and LIFO methods. Assume opening inventory was valued at $10.80 per unit under FIFO and S10.35 per unit under LIFO 2. Assuming Fleet Feet uses a perpetual inventory system, Calculate Fleet Feet's cost of goods sold and ending sock inventory at December 31, 2016 under the FIFO and LIFO methods. Assume opening inventory was valued at $10.80 per unit under FIFO and S10.35 per unit under LIFO. 3. The cost of socks on December 31 2017 was $11.95 per unit. Assuming a perpetual inventory system is used, determine whether Fleet Feet needs to write down any of its inventory under either the FIFO or LIFO methods. Briefly explain why a write down is or is not necessary for each method. If a write-down is necessary, determine the amount and record the appropriate journal entry related to the write-down.Explanation / Answer
Answer 1
Begining Inventory = 500 Units
Purchase = 2200 Units
Total Available Units = 500 + 2200 = 2700 Units
Sales = 2435 Units
Ending Inventory = 265 Units
Purchase Cost
(750 x 11.25) + (800 x 11.60) + (650 x 12.15) = 8437.50 + 9280.00 + 7897.50 = 25615.00
FIFO Periodic
Ending Inventory = 265 x 12.15 = 3219.75
COGS = Begining Inventory + Purchase Cost - Ending Inventory
COGS = (500 x 10.80) + 25615 - 3219.75 = 5400 + 25615 - 3219.75 = $27795.25
LIFO Periodic
Ending Inventory 265 x 10.35 = $2742.75
COGS = Begining Inventory + Purchase Cost - Ending Inventory
COGS = (500 x 10.35) + 25615 - 2742.75 = 5175 + 25615 - 2742.75 = 28047.25
Answer 2
FIFO Perpetual
100@10.80
750@11.25
290@11.25
800@11.60
290@11.60
650@12.15
Ending Inventory = 265 x 12.15 = $3219.75
COGS = Beg. + Purchase - Ending
COGS = 5400 + 25615 -3219.75 = $27795.25
LIFO Perpetual
100@10.35
750@11.25
100@10.35
190@11.25
100@10.35
190@11.25
800@11.60
100@10.35
190@11.25
100@10.35
190@11.25
650@12.15
100@10.35
165@11.25
Ending Inventory = (100 x 10.35) + (165 x 11.25) = 1035 + 1856.25 = $2891.25
COGS = Beg Stock + Purchase Cost - Ending Stock
COGS = (500 x 10.35) + 25615 - 2891.25
COGS = 5175 + 25615 - 2891.25 = $27898.75
Answer 3
US GAAP required to account the ending inventory at lower of cost and market price in books so if we analyze that
Market Price = 265 x 11.95 = $3166.75
Cost of ending stcok as per FIFO Perpetual = $3219.75
Cost of ending stcok as per LIFO Perpetual = $2891.25
So as per we have to write off the inventory in case we have using FIFO perpetual and written off amount will be
$3219.75 - $ 3166.75 = $53
and jiurnal entry for this will be
Dec 31, 2017 Debit Cost of goods sold 53
Credit Inventory 53
(value of inventory wiritten off to comply rules of market price and cost whicever is lower)
so above is the solution to the problem.
Date Purchase Cost Sales Balance Remark Jan 500 10.80 - 500 500@10.80 Feb - - 400 100 100@10.80 Mar 750 11.25 - 850100@10.80
750@11.25
Apr - - 560 290 290@11.25 June 800 11.60 - 1090290@11.25
800@11.60
Oct - - 800 290 290@11.60 Nov 650 12.15 - 940290@11.60
650@12.15
Dec - - 675 265 265@12.15Related Questions
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