Question

Scoresby Inc. tracks the number of units purchased and sold throughout each year but applies its inventory costing method at the end of the year, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31. Units 4,000 Unit Cost $22 Transactions a. Inventory, Beginning For the year: b. Purchase, March 5 c. Purchase, September 19 d. Sale, April 15 (sold for $67 per unit) e. Sale, October 31 (sold for $70 per unit) f. Operating expenses (excluding income tax expense), $606,000 23 10,000 6,000 4.300 9,000 Required: 1. Calculate the number and cost of goods available for sale. 20,000 units Number of Goods Available for Sale | Cost of Goods Available for Sale 2. Calculate the number of units in ending inventory. Ending Inventory units

Answer 1

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Scoresby Inc.
Answer 1	Cost of Goods available for sale
Date	No. of Units	Cost per unit	Amount
Beginning	4,000.00	22.00	88,000.00
5-Mar	10,000.00	23.00	230,000.00
19-Sep	6,000.00	25.00	150,000.00
Cost of Goods available for sale	20,000.00		468,000.00

Answer 2
Cost of Goods available for sale	20,000.00
Less:
Sales on April 15	4,300.00
Sales on Oct 31	9,000.00
Total units sold	13,300.00
Number of units in ending inventory	6,700.00

Periodic FIFO
Date	Cost of Goods available for sale			Cost of Goods sold			Ending Inventory
	No. of Units	Cost per unit	Amount	No. of Units	Cost per unit	Cost of Goods sold	No. of Units	Cost per unit	Ending Inventory
Beginning	4,000.00	22.00	88,000.00	4,000.00	22.00	88,000.00	-	22.00	-
5-Mar	10,000.00	23.00	230,000.00	9,300.00	23.00	213,900.00	700.00	23.00	16,100.00
19-Sep	6,000.00	25.00	150,000.00		25.00	-	6,000.00	25.00	150,000.00
Total	20,000.00		468,000.00	13,300.00		301,900.00	6,700.00		166,100.00

Periodic LIFO
Date	Cost of Goods available for sale			Cost of Goods sold			Ending Inventory
	No. of Units	Cost per unit	Amount	No. of Units	Cost per unit	Cost of Goods sold	No. of Units	Cost per unit	Ending Inventory
Beginning	4,000.00	22.00	88,000.00		22.00	-	4,000.00	22.00	88,000.00
5-Mar	10,000.00	23.00	230,000.00	7,300.00	23.00	167,900.00	2,700.00	23.00	62,100.00
19-Sep	6,000.00	25.00	150,000.00	6,000.00	25.00	150,000.00	-	25.00	-
Total	20,000.00		468,000.00	13,300.00		317,900.00	6,700.00		150,100.00

Periodic Weighted Average
Date
	No. of Units	Cost per unit	Amount
Beginning	4,000.00	22.00	88,000.00
5-Mar	10,000.00	23.00	230,000.00
19-Sep	6,000.00	25.00	150,000.00
Total	20,000.00		468,000.00
Cost per unit		23.40
Number of units sold		13,300.00
Cost of Goods sold		311,220.00
Ending Inventory		156,780.00

Answer 3
	Cost of Ending Inventory	Cost of Goods sold
FIFO	166,100.00	301,900.00
LIFO	150,100.00	317,900.00
Weighted Average	156,780.00	311,220.00

Calculation of Sales Revenue
Date	No. of Units	Sell price	Amount
15-Apr	4,300.00	67.00	288,100.00
31-Oct	9,000.00	70.00	630,000.00
Sales Revenue			918,100.00
Answer 4	Income Statement
	FIFO	LIFO	Weighted Average
Sales Revenue	918,100.00	918,100.00	918,100.00
Cost of Goods sold	301,900.00	317,900.00	311,220.00
Gross Profit	616,200.00	600,200.00	606,880.00
Operating Expense	606,000.00	606,000.00	606,000.00
Income (loss) from operations	10,200.00	(5,800.00)	880.00

Answer 6

Income is lowest in LIFO in fact this method is showing loss of $ 5,800. If there is loss then no tax is to be paid. So LIFO method minimizes taxes.