The following inventory information is available:
Transaction |
Date |
Units |
Dollars |
Beginning Balance |
1/1/2019 |
800 |
$6.00 |
Purchase |
1/10/2019 |
600 |
$5.50 |
Purchase |
1/20/2019 |
950 |
$5.25 |
Purchase |
1/25/2019 |
350 |
$5.00 |
Sale throughout month |
1700 |
$11.75 |
Calculate cost of goods available for sale, cost of goods sold, gross profit, gross profit margin and ending inventory using average cost, LIFO and FIFO inventory methods. The company uses the periodic inventory system. Then state which inventory method would provide the highest net income and Which inventory method provides the highest net income?
Average Cost |
LIFO |
FIFO |
|
Cost of goods available for sale |
|||
Cost of goods sold |
|||
Gross profit |
|||
Gross profit margin |
|||
Ending inventory |
Expert Answer
FIFO | Cost of Goods Available for sale | Cost of Goods Sold | Ending Inventory | ||||||
No of Units | Cost per unit | Cost of Goods Available for sale | No of Units | Cost per unit | Cost of Goods Sold | No of units | Cost per unit | Ending Inventory | |
Beginning Inventory | 800 | $ 6.00 | $ 4,800.00 | 800 | $ 6.00 | $ 4,800.00 | |||
Purchases : | |||||||||
1/10/19 | 600 | $ 5.50 | $ 3,300.00 | 600 | $ 5.50 | $ 3,300.00 | |||
1/20/19 | 950 | $ 5.25 | $ 4,987.50 | 300 | $ 5.25 | $ 1,575.00 | 650 | $ 5.25 | $ 3,412.50 |
1/25/19 | 350 | $ 5.00 | $ 1,750.00 | 350 | $ 5.00 | $ 1,750.00 | |||
Total | 2700 | $ 14,837.50 | 1700 | $ 9,675.00 | 1000 | $ 5,162.50 |
LIFO | Cost of Goods Available for sale | Cost of Goods Sold | Ending Inventory | ||||||
No of Units | Cost per unit | Cost of Goods Available for sale | No of Units | Cost per unit | Cost of Goods Sold | No of units | Cost per unit | Ending Inventory | |
Beginning Inventory | 800 | $ 6.00 | $ 4,800.00 | 800 | $ 6.00 | $ 4,800.00 | |||
Purchases : | |||||||||
1/10/19 | 600 | $ 5.50 | $ 3,300.00 | 400 | $ 5.50 | $ 2,200.00 | 200 | $ 5.50 | $ 1,100.00 |
1/20/19 | 950 | $ 5.25 | $ 4,987.50 | 950 | $ 5.25 | $ 4,987.50 | |||
1/25/19 | 350 | $ 5.00 | $ 1,750.00 | 350 | $ 5.00 | $ 1,750.00 | |||
Total | 2700 | $ 14,837.50 | 1700 | $ 8,937.50 | 1000 | $ 5,900.00 |
Average Cost per unit = $14837.50 / 2700 = $5.50 per unit
Average Cost | LIFO | FIFO | |
Cost of goods available for sale | $ 14,837.50 | $ 14,837.50 | $ 14,837.50 |
Cost of goods sold | $ 9,342.13 | $ 9,675.00 | $ 8,937.50 |
Gross profit | $ 5,495.37 | $ 5,162.50 | $ 5,900.00 |
Gross profit margin | 37.04% | 34.79% | 39.76% |
Ending inventory | $ 5,495.37 | $ 5,162.50 | $ 5,900.00 |
1.
a. Accumulated Depreciation = Cost of asset - Net book value
= $63000 - 45000 = $18000
b. Equipment sale proceeds = Net Book Value + Gain
= $45000 + 2500 = $47500
c. Straight line Depreciation = (Original value - Salvage Value)
/ Useful life
= ($63000-9000)/9 = $6000
d. Years company own asset = $18000 /6000 = 3 years
The following inventory information is available: Transaction Date Units Dollars Beginning Balance 1/1/2019 800 $6.00 Purchase...
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