Question

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1)

Serene Stereos has the following inventory data: Nov. 1 8 17 25 Inventory Purchase Purchase Purchase 26 units @ $5.30 each 106 units @ $5.70 each 53 units @ $5.55 each 79 units @ $5.80 each A physical count of merchandise inventory on November 30 reveals that there are 88 units on hand. Cost of goods sold under FIFO is

2) 3)

Answer 1

Solution 1 As per FIFO system, Stock which came first will be issued at first Therefore, The following will be the stock issued during the year Total Inventory inflow = (26+106+53+79) units 264 units Inventory in Hand on 30 November Therefore, Units sold during the year 264-88 units 88 units 176 units Computation of Cost of Units sold Date of Product Units Rate Purchase 5.30 26 x $5.30 5.70 106 x $5.70 5.55 53 x $5.50 01-Nov 08-Nov 17-Nov $ 26 137.80 106 604.20 244.20 (balance units) $ $ 44 176 986.20 Cost of goods sold under FIFO is $986.20 (176 units) Solution 2 Under LIFO system, the Inventory purchased last is issued first Computation of cost of Goods sold 291 units under LIFO Date of Product Units Rate Purchase $ 01-Feb 103.00 $17,762.00 (balance units) $14,000.00 107.00 166 x $107 = 112.00 125 x $112 = $ 14-Mar 166 $ 01-May 125 $31,762.00 291

Statement showing After tax profits of Dole Industries Particulars Amount Sales (291 units x $144) $ 41,904.00 Less: Cost of Goods sold (computed above) $ 31,762.00 Less: Operating expenses $ 2,850.00 Profit before tax $ 7,292.00 $ Less: Tax @ 30% 2,187.60 Profit after tax $ 5,104.40 Rounded to Whole Dollars 5,105.00 Solution 3 Under LIFO system, the Inventory purchased last is issued first Computation of cost of Goods sold 379 units under LIFO Date of Product Units Rate Purchase $ 01-Feb 56.00 14-Mar 01-May 58.00 215 x $58 = 61.00 164 x $61 = $12,470.00 (balance units) $10,004.00 $ 215 $ 164 $22,474.00 379 Statement showing After tax profits of Hogan Industries Particulars Amount Sales (379 units x $78) $ 29,562.00 Less: Cost of Goods sold (computed above) $ 22,474.00 $ Gross profit 7,088.00 Rounded to Whole Dollars 7,090.00