Compare specific identification, FIFO, and LIFO under periodic method; use cost

Question

Compare specific identification, FIFO, and LIFO under periodic method; use cost flow assumption to influence earnings. You have the following information for Jewels Gems. Jewels uses the periodic method of accounting for its inventory transactions. Jewels only carries one brand and size of diamonds-all are identical. Each batch of diamonds purchased is carefully coded and marked with its purchase cost. Beginning inventory 150 diamonds at a cost of $310 per diamond. March March Purchased 200 diamonds at a cost of $350 each. MarchSold 180 diamonds for $600 each. MarchPurchased 330 diamonds at a cost of $375 each. 10 March 25 Sold 390 diamonds for $650 each. Instructions (a) Assume that Jewels Gems uses the specific identification cost flow method. . 1.Demonstrate how jewels could maximize its gross profit for the month by specifically selecting which diamonds to sell on March 5 and March 25. . 2.Demonstrate how Jewels could minimize its gross profit for the month by selecting which diamonds to sell on March 5 and March 25 Gross profit: Maximum $162,500 Minimum $155.350 (b) Assume that Jewels uses the FIFO cost flow assumption. Calculate cost of goods sold. How much gross profit would Jewels report under this cost fhow assumption? (c) Assume that Jewels uses the LIFO cost flow assumption. Calculate cost of goods sold. How much gross profit would the company report under this cost flow assumption? (d) Which cost flow method should lewels Gems select? Explain.

Explanation / Answer

A. Answer is given in question. B. IF FIFO is followed then Purchase Sell Balance Date Qty Rate Amount Qty Rate Amount Qty Rate Amount Mar 1 150 310 46500 150 310 46500 Mar 3 200 350 70000 150 310 46500 200 350 70000 Mar 5 180 600 108000 170 350 59500 Mar 10 330 375 123750 170 350 59500 330 375 123750 Mar 25 390 650 253500 110 375 41250 Total 240250 361500 Gross Profit = Total Sales + Closing Stock- Purchases Gross Profit = 361500+41250-240250 Gross Profit = 162500 C. IF LIFO is followed then Purchase Sell Balance Date Qty Rate Amount Qty Rate Amount Qty Rate Amount Mar 1 150 310 46500 150 310 46500 Mar 3 200 350 70000 150 310 46500 200 350 70000 Mar 5 180 600 108000 150 310 46500 20 350 7000 Mar 10 330 375 123750 150 310 46500 20 350 7000 330 375 123750 Mar 25 390 650 253500 110 310 34100 Total 240250 361500 Gross Profit = Total Sales + Closing Stock- Purchases Gross Profit = 361500+34100-240250 Gross Profit = 155350 D. If each batch of diamonds coded then specific identification method should be followed.

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

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