Question

PLEASE explain how to get the answer ?

Alternative Inventory Methods

Garrett Company has the following transactions during the months of April and May:

Date	Transaction	Units	Cost/Unit
April 1	Balance	300
17	Purchase	200	$5.10
25	Sale	150
28	Purchase	100	5.90
May 5	Purchase	250	5.10
18	Sale	300
22	Sale	50

The cost of the inventory on April 1 is $5, $4, and $2 per unit, respectively, under the FIFO, average, and LIFO cost flow assumptions.

Required:

1. Compute the inventories at the end of each month and the cost of goods sold for each month for the following alternatives:

1. FIFO periodic

   	Cost of Goods Sold	Ending Inventory
   April	$	$
   May	$	$

2. FIFO perpetual

   	Cost of Goods Sold	Ending Inventory
   April	$	$
   May	$	$

3. LIFO periodic

   	Cost of Goods Sold	Ending Inventory
   April	$	$
   May	$	$

4. LIFO perpetual (Round your intermediate calculations to the nearest cent.)

   	Cost of Goods Sold	Ending Inventory
   April	$	$
   May	$	$

5. Weighted average (Round unit costs to 4 decimal places and final answers to the nearest dollar.)

   	Cost of Goods Sold	Ending Inventory
   April	$	$
   May	$	$

6. Moving average (Round unit costs to 2 decimal places and final answers to nearest dollar.)

   	Cost of Goods Sold	Ending Inventory
   April	$	$
   May	$	$

2. Reconcile the difference between the LIFO periodic and the LIFO perpetual results. If an amount is zero, enter "0".

April	Cost of Goods Sold	Ending Inventory
Difference	$	$
May	Cost of Goods Sold	Ending Inventory
Difference	$	$

3. If Garrett uses IFRS, which of the previous alternatives would be acceptable, and why?

If Garrett Company uses IFRS, it may report its inventory under FIFO, average, or specific identification . It may not use LIFO  under IFRS because it is not consistent with any presumed physical flow of inventory. Also, LIFO  is not allowed for tax purposes in most other countries, so there is no tax incentive for a company to use LIFO . Note that companies that use IFRS and have rising inventory costs will report a higher income because they include holding gains in income.

Answer 1

1. a. April - COGS = Opening Inventory + Purchases - Ending Inventory = 1,500 + 1,610 - 2,360 = $750

Ending Inventory = 100 units*5.9 + 200 u*5.10 + 150 u*5 = $2,360

May - COGS = 2,360 + 1,275 - 1,865 = $1,770

Ending Inventory = 250*5.10 + 100*5.9 = $1,865

b. Answers will be calculated by making a record for ending inventory. Though answer will be the same as (a) part.

FIFO METHOD PURCHASES SALES INVENTORY Units cost amt. units cost amt. amt. 1500 1/4 - 17/4 200 - 5.10 - 1020 units 300 300 200 cost 5 5 5.10 1500 1020 25/4 150 5 750 1505 750 200 5.10 1020 28/4 100 5.90 590 750 1505 200 5.1 | 100 5.90 1020 590 450 units 2,360

1/5 - . . . . . 750 1020 590 150 5 200 5.10 100 5.90 1505 200 5.1 5.9 5/5 250 5.10 1,275 750 1020 590 250 5.10 1,275 18/5 150 150 5 5.1 750 765 255 50 100 5.1 5.9 590 5.1 1,275 22/5 50 5.1 255 100 5.9 590 250 5.1 1275 350 units $1,865

c. April - COGS = 600 + 1,610 - 1,365  = $845

Ending Inventory = 300*2 + 150*5.1 = $1,365

May - COGS = 1,445 + 1,275 - 855 = $1,865

Ending Inventory = 300*2 + 50*5.10 = $855

d. We will make a record of inventory (Image is attached).

April - COGS = $765

Ending Inventory = $1,445

May - COGS = $1,865

Ending Inventory = $855

LIFO METHOD PURCHASES SALES INVENTORY Units cost amt. units cost amt. units cost amt. 300 2 600 1/4 . 17/4 200 . 5.10 . 1020 3002 600 2005.10 1020 25/4 150 5.10 765 600 3002 50 5.10 255 28/4 100 5.90 590 600 50 100 5.10 5.90 255 590 450 units 1,445

100 5.90 590 450 units 1,445 1/5 - 300 600 50 2 5.10 5.90 255 590 5/5 250 5.10 1,275 2 600 50 5.10 255 5.90 590 1,275 18/5 600 250 50 5.1 5.9 765 295 255 300 50 50 300 50 5.10 2 2 5.1 5.9 2 5.1 295 600 22/5 50 5.9 295 255 350 units $855

We will sell the latest units first in LIFO.