Question

P6-8B

P6-8B Ticotin Inc. is a retailer operating in British Columbia. Ticotin uses the perpetual inventory method. All sales returns from customers result in the goods being returned to inventory: the inventory is not damaged. Assume that there are no credit transactions, all amounts are settled in cash. You are provided with the following information for Ticotin Inc. for the month of January 2012 Date Description Quantity Unit Cost or Selling Price January 1 Beginning inventory $15 January 5 Purchase January 8 Sale January 10 Sale return January 15 Purchase January 16 Purchase return January 20 Sale January 25 Purchase Instructions (a) For each of the following cost flow assumptions, calculate (i) cost of goods sold, (ii) ending inventory, and (iii) gross profit. 1. LIFO. 2. FIFO. 3. Moving-average cost. (b) Compare results for the three cost flow assumptions.

Answer 1

1) FIFO Method

Date Description Purchases/Sales Cost of Goods Op Inventory Return sold/Purchase Return Quantity Rate Value Quantity Rate Value Quantity Rate Value 100 15 1,500 100 15 1,500 150 18 2,700 Jan-01 Beginning Inventory Jan-05 Purchase Closing Inventory Quantity Rate Value 100 15 1,500 100 150 1,500 150 180 2,700 Jan-08 Sales 100 10 15 181 1,500 180 100 150 140 150 15 1,500 180 2,700 18 2,520 18 2,700 Jan-10 Sales Return Jan-15 Purchase 10 55 18 20 180 1,100 Jan-16 Purchase Return 5 80 20 18 100 1,440 150 55 150 50 70 50 140 150 150 55 150 50 70 50 70 50 30 180 2,700 20 1,100 18 2,700 20 1,000 18 1,260 | 20 1,000 Jan-20 Sale 18 2,520 18 2,700 18 2,700 20 1,100 18 2,700 20 1,000 18 1,260 20 1,000 18 1,260 20 1,000 22 660 Jan-25 Purchase 30 22 660

LIFO Method

Purchases/Sales Cost of Goods Date Description Op Inventory Return sold/Purchase Return Closing Inventory Quantity Rate Value Quantity Rate Value Quantity Rate Value Quantity Rate Value Jan-01 Beginning Inventory 100 15 1,500 10015 1,500 Jan-05 Purchase 100 15 1,500 150 180 2,700 100 15 1,500 150 18 2,700 Jan-08 Sales 100 150 1.500 100 15 1,500 150 180 2,700 110 18 1,980 40 18720 Jan-10 Sales Return 100 15 1,500 100 15 1,500 40 18 720 10 18 180 50 18 900 Jan-15 Purchase 100 15 1,500 55 20 1,100 100 15 1,500 50 18 900 50 18 900 55 20 1,100 Jan-16 Purchase Return 100 15 1,500 100 15 1,500 55 20 1,100 5 20 100 50 20 1,000 50 18 900 50 18 900 Jan-20 Sale 100 15 1,500 100 15 1,500 50 18 900 30 18 540 20 18 360 50 20 1,000 50 20 1,000. 0 0 Jan-25 Purchase 100 151,500 30 22 660 100 15 1,500 20 18 360 20 18 360 30 22 660

Weighted Average method

Purchases/Sales Cost of Goods Date Description Op Inventory Return sold/Purchase Return Quantity Rate Value Quantity Rate Value Quantity Rate Value Jan-01 Beginning Inventory 100 15 1,500 Jan-05 Purchase 100 15 1,500 150 18 2,700 Jan-08 Sales 250 16.8 4,200 110 16.8 1,848 Jan-10 Sales Return 140 16.8 2,352 10 16.8 168 Jan-15 Purchase 150 16.8 2,520 55 20 1,100 Jan-16 Purchase Return 205 17.7 3,620 5 20 100 Jan-20 Sale 200 17.6 3,520 80 17.6 1,408 Jan-25 Purchase 120 17.6 2,112 30 22 660 Closing Inventory Quantity Rate Value 100 15 1,500 250 16.8 4,200 140 16.8 2,352 150 16.8 2,520 205 17.7 3,620 200 17.6 3,520 120 17.6 2,112 150 18.5 2,772