Question

be x, x² A-ay-A- TI HUUUUUUCU ADUL Ha Strong Subtitle Title IN Emphasis Heading 1 1 Normal Font Paragraph Styles #1 On February 1, Bike Mart had a beginning inventory of 20 bicycles which it purchased for S300 each. On February 5th, the company purchases four more bicycles for $350 each. None were sold that week. On February 12th, the company purchases six more bicycles for $400 each. Between February 13 and 28, Bike Mart sells 12 of these bicycles. a.) Calculate Bike Mart's Ending Inventory Balance (in dollars) at the end of February and Cost of Goods Sold through February using the LIFO Method. (show all work.)

Answer 1

1)

a)

Calculate Bike Mart’s Ending Inventory Balance (in dollars) at the end of February and Cost of Goods Sold through February using the LIFO Method.

LIFO
				Cost of goods sold			Closing Inventory
	Qty	Rate	Total	Qty	Rate	Total	Qty	Rate	Total
Beg. Inventory	20	$300	$6,000				20	$300	$6,000
Purchase	4	$350	$1,400				20	$300	$6,000
							4	$350	$1,400
Purchase	6	$400	$2,400				20	$300	$6,000
							4	$350	$1,400
							6	$400	$2,400
Sell				6	$400	$2,400
				4	$350	$1,400
				2	$300	$600	18	$300	$5,400
Balance						$4,400	18	$300	$5,400

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(b)

Calculate Bike Mart’s Ending Inventory Balance (in dollars) at the end of February and Cost of Goods Sold through February using the Weighted Average Method.

Qty	Rate	Total
20	$300	$6,000
4	$350	$1,400
6	$400	$2,400
30		$9,800
Weighted average cost ($9800/30)		$326.66

Cost of goods sold = Number of units sold  $\times$ Weighted average cost per unit

= 12 units  $\times$ $326.66

= $3,919.92

Closing Inventory Cost = [(30-12) $\times$ $326.66] = $5879.88

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(c)

At the end of February, will Bike Mart’s Net Income (profits) on its Income Statement be higher if it uses the LIFO or Weighted Average Inventory Method:

Higher the value of closing stock higher the net income. therefore, the net profit under weighted average will be higher.

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(d)

The Total Assets on its balance sheet will higher if it follows Weighted average inventory because closing stock inventory is higher as compare to LIFO.