Question

2. Green Company merchandises a single inventory item. The company uses the periodic inventory system and has provided the following data: 1/1/16 Inventory 4,000 units valued at $4,000 in total (using LIFO). 1/1/16 LIFO Reserve = $5,000 4/1/16 Purchased 8,000 units at $2.10 per unit 6/1/16 Purchased 4,000 units at $2.30 per unit 8/1/16 Purchased 5,000 units at $2.50 per unit For the year ended 12/31/16 a total of 10,000 units were sold at $3.50 per unit Requirements: A. Calculate Green's COGS for the year ending 12/31/16 assuming they use the LIFO inventory method. (10) B. Calculate Green's LIFO reserve as of 12/31/16 (10)

Answer 1

As the per LIFO Clast goods purchased in first last are out) sold 1 on The sale of 10000 units 5000 out of purchases on uooo out of purchases on and a 1000 out of purchases on are 8/1/16 6/1/16 4/1/16. co GS (cost of goods sold) is (8000 x $2.5) + (1000x23) t 1000 x 2.1) = $12500 + $9200 + 2100 - $23800 cost of goods sold valuation of stock of Ending inventory goods left are 11000 units $4000 + ( 7000x 2.1) > $ 8200 LIFO As per 3 FIFO (22000 X 2.1) + (4000x 23) +(5000x2.5) i = $ 25900

lifo Resowe - FIFO valuation - LIFO Valuation 7 $ 25900 - $18700 = $ 7200 O pening CIFO Resewe = Current year's LIFO Rescue = $5000 $ 7200 Total LIFO Reserve as of 12/31/16 $12200