1 of 1 ACCT:2100 Spring 2018 Chapter 7 Take-Home Quiz The following information

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 500 Beginning sock inventory at January 1, 2017 Purchases on Account: S1125 $11.60 S12.15 March 1 June November 750 800 650 Units Selling Price Sales on Account: February 28 April 30 October 16.10 400 560 675 $17.05 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

The question was very long. I was able to complete Part 1 and Part 2 within the available time.

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Part 1)

The value of Cost of Goods Sold and Ending Inventory with the use of periodic inventory system under both the methods is determined as below:

FIFO:

Ending Inventory = Ending Inventory*Cost Per Unit of Latest Inventory Purchased = (500 + 750 + 800 + 650 - 400 - 560 - 800 - 675)*12.15 = $3,219.75

Cost of Goods Sold = Total Cost of Units Available for Sale - Total Cost of Ending Inventory = (500*10.80 + 750*11.25 + 800*11.60 + 650*12.15) - 3,219.75 = $27,795.25

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LIFO:

Ending Inventory = Ending Inventory*Cost Per Unit of Earliest Inventory = (500 + 750 + 800 + 650 - 400 - 560 - 800 - 675)*10.35 = $2,742.75

Cost of Goods Sold = Total Cost of Units Available for Sale - Total Cost of Ending Inventory = (500*10.35 + 750*11.25 + 800*11.60 + 650*12.15) - 2,742.75 = $28,047.25

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Part 2)

The value of Cost of Goods Sold and Ending Inventory with the use of perpetual inventory system under both the methods is determined as below:

FIFO:

From the values calculated in the table, we get,

Cost of Goods Sold = $27,795.25

Ending Inventory = $3,219.75

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LIFO:

From the values calculated in the table, we get,

Cost of Goods Sold = $27,898.75

Ending Inventory = $2,891.25

Date Purchases Sales Balance January 1 2017 Opening Balance 5,400.00 (500*10.80) February 28 2017 4,320.00 (400*10.80) 1,080.00 (100*10.80) March 1 2017 8,437.50 (750*11.25) 1,080.00 (100*10.80) 8,437.50 (750*11.25) April 30 2017 1,080.00 (100*10.80) 3,262.50 (290*11.25) 5,175.00 (460*11.25) June 1 2017 9,280.00 (800*11.60) 3,262.50 (290*11.25) 9,280.00 (800*11.60) October 1 2017 3,262.50 (290*11.25) 3,364.00 (290*11.60) 5,916.00 (510*11.60) November 1 2017 7,897.50 (650*12.15) 3,364.00 (290*11.60) 7,897.50 (650*12.15) December 1 2017 3,364.00 (290*11.60) 3,219.75 (265*12.15) 4,677.75 (385*12.15) Total $25,615.00 $27,795.25 $3,219.75

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