Thompson Corp. uses a perpetual inventory system, The following transactions aff

Question

Thompson Corp. uses a perpetual inventory system, The following transactions affected its merchandise inventory during the month of August 2018: Aug. 1 Inventory on hand-2,000 units; cost $6.10 each 8 Purchased 10,000 units for $5.50 each. 14 Sold 8,000 units for $12.00 each. 18 Purchased 6,000 units for $5.00 each 25 Sold 7,000 units for $11.00 each. 31 Inventory on hand -3,000 units. Required: Determine the inventory balance Thompson would report in its August 31, 2018, balance sheet and the cost of goods sold it would report in its August 2018 income statement using each of the following cost flow methods: 1. First-in, first-out (FIFO) (4 points) 2. Last-in, first-out (LIFO) (4 points) 3. Average cost (2 points) 1. First-in, first-out (FIFO) Purchased Date Beginning inventory Sold Balance August 8 August 14 August 18 August 25 August 31

Explanation / Answer

FIFO (Perpetual) DATE Cost of goods available for sale Cost of Goods sold Closing inventory Units Rate Amount Units Rate Amount Units Rate Amount Beginning Inventory 2000 6.1 12200 2000 6.1 12200 Purchase 8-Aug 10000 5.5 55000 2000 6.1 12200 10000 5.5 55000 14-Aug 2000 6.1 12200 6000 5.5 33000 4000 5.5 22000 18-Aug 6000 5 30000 4000 5.5 22000 6000 5 30000 25-Aug 4000 5.5 22000 3000 5 15000 3000 5 15000 Total 18000 97200 15000 82200 3000 15000 LIFO (Perpetual) DATE Cost of goods available for sale Cost of Goods sold Closing inventory Units Rate Amount Units Rate Amount Units Rate Amount Beginning Inventory 2000 6.1 12200 2000 6.1 12200 Purchase 8-Aug 10000 5.5 55000 2000 6.1 12200 10000 5.5 55000 14-Aug 8000 5.5 44000 2000 6.1 12200 2000 5.5 11000 18-Aug 6000 5 30000 2000 6.1 12200 2000 5.5 11000 6000 5 30000 25-Aug 6000 5 30000 2000 6.1 12200 1000 5.5 5500 1000 5.5 5500 Total 18000 97200 15000 79500 3000 17700 Average cost DATE Cost of goods available for sale Cost of Goods sold Closing inventory Units Rate Amount Units Rate Amount Units Rate Amount Beginning Inventory 2000 6.1 12200 2000 6.1 12200 Purchase 8-Aug 10000 5.5 55000 2000 6.1 12200 10000 5.5 55000 Average Cost 12000 5.6 67200 14-Aug 8000 5.6 44800 4000 5.6 22400 18-Aug 6000 5 30000 4000 5.6 22400 6000 5 30000 Average Cost 10000 5.24 52400 25-Aug 7000 5.24 36680 3000 5.24 15720 Total 18000 97200 15000 81480 3000 5.24 15720

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