Question

Monitor Industries, Inc., completed the following inventory transactions during the month of March: (Click the icon to view the transactions.) Read the requirements. Requirement 1. Without resorting to calculations, determine which inventory method will result in Monitor Industries, Inc., paying the lowest income taxes. In times of increasing inventory prices, as is the case here, the LIFO method will result in Monitor Industries, Inc., paying the lowest income taxes. Requirement 2. Prepare a perpetual inventory record using FIFO. Start by entering the beginning inventory balances. Enter the transactions in chronological order, calculating new inventory on hand balances after each transaction. Once all of the transactions have been entered into the perpetual record, calculate the quantity and total cost of inventory purchased, sold, and on hand at the end of the period. (For cost of goods sold, enter the first layer out under FIFO costing first. For inventory on hand, enter the oldest inventory layer first.) Purchases Cost of goods sold Inventory on hand i Data Table Total Unit Total Unit Cost Total Cost Unit Cost Date Qty Qty Cost Qty Cost Cost Mar 1 Date Item Quantity Unit Cost Mar 4 Mar es 80 $ 60 Mar 12 1 Balance 4 Purchase 12 Sale 22 Purchase 31 Sale 54 Mar 22L Mar 31 Print Done Total Requirement 3. Prepare a perpetual inventory record using LIFO.

Answer 1

Monitor Industries : Requirement 2 FIfo method Perpetual inventory Record Cost of goods sold Quantity unit cost Total cost Date Quantity Mar-01 Purchases unit cost Total cost Inventory Quantity unit cost total cost 15 $65.00 $ 975.00 04-Mar 80 $ 60.00 $ 4,800.00 15 $65.00 80 $60.00 $ $ 975.00 4,800.00 12-Mar 15 $65.00 75 $60.00 $ $ 975.00 4,500.00 5 $60.00 $ 300.00 22-Mar 40 $ 54.00 $ 2,160.00 5 $60.00 40 $54.00 $ $ 300.00 2,160.00 31-Mar 5 $60.00 19 $54.00 $ $ 300.00 1,026.00 21 $ 54.00 $ 1,134.00 Total = 120 $ 6,960.00 114 $ 6,801.00 $ 1,134.00

Monitor Industries : Requirement 3 LIfo method Perpetual inventory Record Cost of goods sold Quantity unit cost Total cost Date Quantity Mar-01 Purchases unit cost Total cost Inventory Quantity unit cost total cost 15 $65.00 $ 975.00 04-Mar 80 $ 60.00 $ 4,800.00 15 $65.00 80 $60.00 $ $ 975.00 4,800.00 12-Mar 10 $65.00 80 $60.00 $ $ 650.00 4,800.00 5 $65.00 $ 325.00 22-Mar 40 $ 54.00 $ 2,160.00 5 $65.00 40 $54.00 $ $ 325.00 2,160.00 31-Mar 24 $ 54.00 $ 1,296.00 5 $65.00 16 $ 54.00 $ $ 325.00 864.00 Total = 120 $ 6,960.00 $ 6,746.00 $ 1,189.00

Monitor Industries : Requirement 4 Average Cost method Perpetual inventory Record Cost of goods sold Quantity unit cost Total cost Date Purchases unit cost Total cost Quantity Inventory Quantity unit cost total cost 15 $65.00 $ 975.00 Mar-01 04-Mar 80 $ 60.00 $ 4,800.00 15 $65.00 80 $60.00 95 $ 60.8 $ $ $ 975.00 4,800.00 5,775.00 12-Mar 90 $ 60.8 $ 5,471 5 $ 60.8 $ 304 22-Mar 40 $ 54.00 $ 2,160.00 5 $ 60.8 40 $ 54.00 45 $ 54.8 $ $ $ 304 2,160.00 2,464 31-Mar 24 $ 54.8 $ 1,314 5 $ 60.8 16 $ 54.8 $ $ 304 876 Total 120 $ 6,960.00 114 $ 6,785 21 $ 1,180

Requirement 1 In Times of Decreasing inventory prices, as in the case here the FIFO method will result in Monitor Industries Inc paying the lowest income taxes