Question

Lopez Company reported the following current-year data for its only product. The company uses a periodic inventory system, and its ending inventory consists of 390 units—130 from each of the last three purchases. Jan. 1 Beginning inventory Mar. 7 Purchase July 28 Purchase Oct. 3 Purchase Dec. 19 Purchase Totals 230 units @ $3.20 500 units @ $3.75 1,140 units @ $3.70 1,020 units @ $4.60 440 units @ $4.10 3,330 units = $ 736 = 1,875 = 4,218 = 4,692 = 1,804 $ 13,325 Determine the cost assigned to ending inventory and to cost of goods sold for the following. (Do not round intermediate calculations and round your answers to 2 decimal places.) ſ (a) Specific identification (b) Weighted average (c) FIFO (d) LIFO Ending Inventory $ 1,612.00 $ 1,516.00 $ 1,599.00 $ 1,362.25 Cost of Goods Sold $ 11,713.00 $ 11,765.00 $ 11,726.00 $ 11,962.50 Which method yields the highest net income? Specific identification FIFO LIFO Weighted average

Answer 1

Date Item Qty CGS Worksheet for Specific Identification End **End Unit S Total S Inventor, Inventory s Qty Sold y Qty: 230 $3.20 $736 $0 230 500 $3.751 $1.875 $0 500 1,140 $3.70 $4,218 $481 1.010 1,020 $4.60 $4,692 130 $5981 890 440 $4.10 $1,804 130 $533 310 3,330 $13,325 390 $1,612 2,940 Jan-01 Begin Inventory Mar-07 Purchase Jul-28 Purchase Oct-03 Purchase Dec-19 Purchase Total 130 $736 $1,875 $3,737 $4,094 $1,271 $11,713

Workings for Weighted Average Method: Number of Units Purchased (Incl Beginning Inventory) = 3,330 units Cost of Purchases (Incl Beginning Inventory) = $13,325 Cost per unit = 13325/3330 $4.0015 Particulars Units Cost per unit Amount (S) Cost of Goods Sold 2.940 $4.0015 $11,764.41 Ending Inventory 390 $4.0015 $1,560.59

Date Item Qty Qty Jan-01 Begin Inventory Mar-07 Purchase Jul-28 Purchase Oct-03 Purchase Dec-19 Purchase Total 230 500 1.140 1,020 440 3,330 Worksheet for FIFO End **End Unit S Total S Inventor Inventory Qty Sold CGS $3.20 $736 $0 230 $736 $3.75 $1.875 $0 500 $1.875 $3.70 $4,218 $0 1.140 $4,218 $4,6921 - $0 Sol 1.020 $4,692 $4.10 $1,804 390 $205 $13,325 390 $1,599 2,940 11,726 $1,599 Date Item Qty Qty Sola CGS Jan-01 Begin Inventory Mar-07 Purchase Jul-28 Purchase Oct-03 Purchase Dec-19 Purchase Total 230 500 1.140 1.020 440 3,330 Worksheet for LIFO End **End Unit S Total S Inventor Inventory S v Qty* $3.20 $736 230 $736 $3.75 $1.875 160 $600 $3.70 $4,218 . $0 $4,692 $4.10 $1,804 S13,325 390 $1,336 340 $1,275 1.140 $4,218 1,020 $4,692 440 $1.804 2,940 s11,989

Particulars Specific Identification Weighted Average FIFO LIFO Ending Inventory Cost of Goods Sold $1,612.00 $11,713.00 $1,560.59 $11,764.41 $1,599.00 $11,726.00 $1.336.00 $11,989.00

option A : Specific Identification method yields the highest net income

Method Which yields the highest net income? Assume the Selling price of the product be $ 8 Particulars Specific Identification Weighted Average FIFO LIFO Sales Less: Cost of Goods Sold Net Income $23,520.00 -$11,713.00 S11,807.00 $23.520.00 $23,520.00 $23.520.00 (2940 x 8) -$11,764.41 -$11,726.00 -$11,989.00 (As per computation) $11,755.59 $11,794.00 $11,531.00 Ending Inventory $1,612 $1,560.59 $1,599 $1,336 Specific Identification method yields the Highest net income. In other words, Method which has highest Ending Inventory value will yield the highest net income.