Purchase price $40 per ton 42 per torn Date Jan 1 Jan 15 Jan 24600) sold Feb 7 F

ID: 2553522 • Letter: P

Question

Purchase price $40 per ton 42 per torn Date Jan 1 Jan 15 Jan 24600) sold Feb 7 Feb 14 150) sold Feb 21 March 2 (500) March 15 March 22 (450) Tons 500 700 200 450 350 45 per ton 50 per torn 52 per toin As of the end of March there are 500 tons left in inventory. Required: Calculate the Cost of Goods Sold and Ending Inventory for March 31, under (a) FIFO and (B) LIFO 1 2 If the net realizable value of the inventory on March 31 was 47 per ton, what is the inventory value that would be put on the balance sheet using the lower of cost or market method for (a) FIFO and (b) for LIFO. Which method in part 1 is required for external reporting? Or is the company's choice? If their choice, how should they decide? Record the following entries: a To record the Feb 7 purchase of inventory on account. b To record the sale on account and the relieving of inventory for the sale on March 3 4 15, assuming the inventory was sold for $80 per ton.

Explanation / Answer

FIFO

sales from feb 7 purchase

sales from feb 21 purchase

150

300

$45

2250

6750

15000

Inventory Fromfeb 21 Purchase

inventory from march

LIFO METHOD

units from march 15 350

units from feb 21 450

units from feb 7 200

units from jan 15 700

total

value of closing inventory = 500 units

rate = $40 value = $20000

it is the company choice to follow the policies.

150

350

$50

$52

$50

$45

$42

$7500

$18200

18200

22500

$9000

$29400

$79100

Units Available for Sale = 500+700+200+350 +450 = 2200 tons Units Sold = 600+150+500+450 = 1700 Units in Ending Inventory = 500 Cost of Goods Sold Units Unit Cost Total Sales From jan1 Inventory 500 $40.00 $20000 Sales From jan 15 Purchase 100 $42 $4200 Sales From jan 15Purchase 150 $42 $6300 Sales From jan 15 Purchase 450 $42.0 $18900 Sales From feb 7 Purchase