Question

P6-2A Kyoto Distribution markets CDs of the performing artist A. A. Bondy. At the begin. Determine cost of goods sold ning of Maych, Kyoto had in beginning inventory 1,500 Bondy CDs with a unit cost of 57. During and inventory March Kyoto made the following purchases of Bondy CDs. FIFO, LIPO and ever -cost with analysis March 3,000 $8 March 214,000 $10 (SO 2, 3) March 135,500 @ $9 March 26 2,000 @ $11 During March 12,500 units were sold. Kyoto uses a periodic inventory system. Instructions (a) Determine the cost of goods available for sale. (b) Determine (1) the ending inventory and (2) the cost of goods sold under each of the assumed ( 2) Cost of goods sold: FIFO $109,000 cost flow methods (FIFO, LIFO, and average cost). Prove the accuracy of the cost of goods LIFO $119,500 sold under the FIFO and LIFO methods. Average $114,062 (c) Which cost flow method results in (1) the highest inventory amount for the balance sheet and (2) the highest cost of goods sold for the income statement?

Answer 1

P6-2A

a. Cost of goods available for sale:

Date	Unit	Unit cost	Amount
Beginning inventory	1,500	$7	$10,500
March 5	3,000	8	24,000
March 13	5,500	9	49,500
March 21	4,000	10	40,000
March 26	2,000	11	22,000
Total cost of goods available for sale	16,000		$146,000

Ending inventory in units = 16,000 - 12,500 = 3,500 units

b.

FIFO :

Ending Inventory = $22,000+15,000 (1,500*10) = $37,000

Cost of goods sold = $146,000 - 37,000 = $109,000

LIFO:

Ending inventory = $10,500+16,000 (2,000*$8) = $26,500

Cost of goods sold = $146,000 - 26,500 = $119,500

Average:

Average cost per unit = $146,000 / 16,000 = $9.125

Ending inventory = 3,500 * $9.125 = $31,938

Cost of goods sold = 12,500 * $9.125 = $114,062

c.

FIFO method results in highest inventory amount for balance sheet.

LIFO method results in highest cost of goods sold for income statement.