On December 1, Klyak Ellectronics Ltd. has three DVD players left in stock. All

Question

On December 1, Klyak Ellectronics Ltd. has three DVD players left in stock. All are identical, all are priced to sell at $160. One of the three DVD players left in stock, with serial 1012, was purchased on June 1 at a cost of $115. Another, with serial 1045, was purchased on November 1 for $92. The last player, serial #1056, was purchased on November 30 for $80. Calculate the cost of goods sold using the FIFO periodic inventory method assuming that two of the three players were sold by the end of December, Klyak Electronics year-and. Cost of goods sold $ If Klyak Electronics used the specific Identification method instead of the FIFO method, how might it alter its earnings by "selectively choosing" which particular players to sell to the two customers? What would Klyak's cost of goods sold be if the company wished to minimize earnings? Maximize earnings?

Explanation / Answer

a. The cost of the goods sold using the FIFO method would be as follows:

$115+$92 = $207

The FIFO costs would include the beginning inventory and the first unit purchased in the current year hence the cost of initial two purchases would account for the cost of goods sold using FIFO method.

b. In order to minimize the earnings the goods with the highest cost would be sold first, hence the value will be:

$115+$92 = $207

c. In order to maximize the earnings the goods with the least cost would be sold first, hence the value would be:

$80+$92 = $172

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