Question

LIPO, average-cost-will show the highest net income? E8-12 (L03) (FIFO, LIFO, Average-Cost Inventory) Shania Twain Comp pany was formed on December 1, 2016. The following information is available from Twain's inventory records for Product BAP Units 600 Unit Cost $ 8.00 January 1, 2017 (beginning inventory) Purchases: January 5, 2017 January 25, 2017 February 16, 2017 March 26, 2017 1,200 1,300 800 9.00 10.00 11.00 12.00 600 A physical inventory on March 31, 2017, shows 1,600 units on hand. Instructions Prepare schedules to compute the ending inventory at March 31, 2017, under each of the following inventory methods. (a) FIFO (b) LIFO. (c) Weighted average (round unit costs to two decimal places).

Answer 1

B C D Shania Twain Company Computation of Inventory for Product Under FIFO Inventory Method March 31, 2017 Units Unit Cost 4 Purchases, March 26, 2017 6000 $12.00 5 Purchases, February 16, 2017 800 $11.00 6 Purchases, January 25, 2017 200 $10.00 7 Ending inventory, March 31, 2017 Total Cost $7,200 $8,800 $2.000 $18,000 1.600 Shania Twain Company Computation of Inventory for Product Under LIFO Inventory Method March 31, 2017 Units Unit Cost 12 Beginning inventory, January 1, 2017 6000 $8.00 13 Purchases, January 5, 2017 1.000 $9.00 14 Ending inventory, March 31, 2017 1.600 Total Cost $4,800 $9.000 $13.800 17 16 c. Shania Twain Company Computation of Inventory for Product Under Weighted-Average Inventory Method March 31, 2017 Units Unit Cost 19 Beginning inventory, January 1, 2017 | 600 $8.00 20 Purchases, January 5, 2017 1,200 $9.00 21 Purchases, January 25, 2017 1,3001 $10.00 22 Purchases. February 16, 2017 800 $11.00 23 Purchases, March 26, 2017 600 $12.00 24 Totals 4.500 25 Weighted average cost per unit $9.91 Total Cost $4,800 $10,800 $13,000 $8.800 $7.200 $44.600 26 27 Ending inventory, March 31, 2017 1,600 $15,856

Calculations are shown below: А D B C 1 a. Shania Twain Company Computation of Inventory for Product Under FIFO Inventory Method March 31, 2017 Units Unit Cost 4 Purchases, March 26, 2017 1600 12 5 Purchases. February 16, 2017 6 Purchases, January 25, 2017 =1600-B4-B5 7 Ending inventory, March 31, 2017 =SUM(B4:B6 800 Total Cost =B4%C4 =B5%C5 =B6*C6 =SUMD4:D Shania Twain Company Computation of Inventory for Product Under LIFO Inventory Method March 31, 2017 Units Unit Cost Total Cost 12 Beginning inventory, January 1, 2017 600 18 =B12*C12 13 Purchases, January 5, 2017 =1600-B12 =B13*C13 14 Ending inventory, March 31, 2017 =SUM(B12:B13) =SUM(D12:013) 15 16 c. 17 Shania Twain Company Computation of Inventory for Product Under Weighted-Average Inventory Method March 31, 2017 Units Unit Cost Total Cost 19 Beginning inventory, January 1, 2017 600 =B19*C19 20 Purchases, January 5, 2017 1200 =B20*C20 21 Purchases, January 25, 2017 1300 =B21*C21 22 Purchases. February 16, 2017 800 =B22*C22 23 Purchases, March 26, 2017 600 =B23*C23 24 Totals =SUMB19:B23) =SUM(D19:023) 25 Weighted average cost per unit =D24/B24 26 27 Ending inventory, March 31, 2017 1600 =B27*9.91