Question

P6-6A You are provided with the following information for Gobler Inc. Gobler Inc. uses the periodic method of accounting for its inventory transactions. Compare specific identification, FIFO, and LIFO under periodic method: use cost flow assumption to justify price increase. (LO2) March 1 Beginning inventory 2,000 liters at a cost of 60€ per liter. March 3 Purchased 2,500 liters at a cost of 65€ per liter. March 5 Sold 2,300 liters for $1.05 per liter. March 10 Purchased 4,000 liters at a cost of 72€ per liter. March 20 Purchased 2,500 liters at a cost of 80c per liter. March 30 Sold 5,200 liters for $1.25 per liter. Instructions (a) Prepare partial income statements through gross profit, and calculate the value of ending inventory that would be reported on the balance sheet, under each of the fol- lowing cost flow assumptions. (Round ending inventory and cost of goods sold to the nearest dollar.) (1) Specific identification method assuming: (i) The March 5 sale consisted of 1,000 liters from the March 1 beginning inven tory and 1,300 liters from the March 3 purchase; and (ii) The March 30 sale consisted of the following number of units sold from begin- ning inventory and each purchase: 450 liters from March 1; 550 liters from March 3; 2,900 liters from March 10; 1,300 liters from March 20. (2) FIFO. (3) LIFO. (b) How can companies use a cost flow method to justify price increases? Which cost flow method would best support an argument to increase prices? (a) Gross profit: (1) Specific identification $3,715 (2) FIFO (3) LIFO $3,930 $3,385

Answer 1

Gooses profit Lifefo 5815 Sake (2800 X 107 + (53008 (120) : 1495 (a) cast of goods gold 2300 X 0.65 2700 x 0.72 = 2500 x 0.80 1944 2000 6435) 3476 .: Grass profit

vakuation of closting foventory Dade 01/03 03103 Transaction opening perchase Stork There . 2000. Croco+450) 2500 [1320 4550 2300 (2800).. uooo, [2900) 2500 [1300] 15200 5200) . closing peeunit value 550 0.60 330 650 0.65 422.5 - 1100 12000 60 860 - - take 072792 D5103 40103 purchase 80103 250405 purdaye pake ... value of closing stock : ) LIfo telfod, percbanes... fales : Ralene 2000 ifters 200 litere 01103. 2000X0-60:-, 2500X 0.65 3. (2300% 0.65) 2300K 1.05 :, 2415 03/03 : ostos 1300 liter (2900) 4000 0072 10/03 2500 @ 0.80 (2500) 5200 liters 2500 20103 80103 2000 X0-60 8202 value of stock . 6 200X0-65 J (300X0-72

Gooses profit Lifefo 5815 Sake (2800 X 107 + (53008 (120) : 1495 (a) cast of goods gold 2300 X 0.65 2700 x 0.72 = 2500 x 0.80 1944 2000 6435) 3476 .: Grass profit