Question

Check my work 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. eBook Units 3,000 Unit Cost $ 8 Hint Print Transactions a. Inventory, Beginning For the year: b. Purchase, March 5 c. Purchase, September 19 d. Sale, April 15 (sold for $29 per unit) e. Sale, October 31 (sold for $31 per unit) f. Operating expenses (excluding income tax expense), $250,000 9,5009 5,000 11 4,000 8,000 References Required: 1. Calculate the number and cost of goods available for sale. 2. Calculate the number of units in ending inventory. 3. Compute the cost of ending inventory and cost of goods sold under (a) FIFO, (b) LIFO, and (c) weighted average cost. 4. Prepare an income statement that shows the FIFO method, LIFO method and weighted average method. 6. Which inventory costing method minimizes income taxes? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 6

Only Question 4.

Answer 1

Scoresby Inc.
Income Statement	FIFO	LIFO	Average cost		Calculation
Sales Revenue	364,000	364,000	364,000		=(4,000*29)+(8,000*31)
Cost of goods sold	105,000	118,000	112,800
Gross Profit	259,000	246,000	251,200
Operating Expenses	250,000	250,000	250,000
Income (Loss) from Operations	9,000	(4,000)	1,200

Scoresby Inc. Periodic Inventory System Inventory sheet - FIFO Date Decription Quantity Cost per unit Total cost 1-Jan Beginning Inventory 3,000 $ 8.00 $ 24,000 5-Mar Purchase 9,500 $ 9.00 $ 85,500 19-Sep Purchase 5,000 $ 11.00 $ 55,000 Goods Available for Sale 17,500 $164,500 Ending Inventory 5,000 $ 11.00 $ 55,000 Latest cost of $11 & $9 per unit to value inventory Ending Inventory 500 $ 9.00 $ 4,500 Ending Inventory - total 5,500 59,500 =17,500-12,000 = 5,500 units ending inventory Cost of goods sold 12,000 105,000 =4,000+8,000 = 12,000 units sold Inventory sheet - LIFO Date Decription Quantity Cost per unit Total cost Calculation 1-Jan Beginning Inventory 3,000 $ 8.00 $ 24,000 5-Mar Purchase 9,500 $ 9.00 $ 85,500 19-Sep Purchase 5,000 $ 11.00 $ 55,000 Goods Available for Sale 17,500 $ 164,500 Ending Inventory 3,000 $ 8.00 $ 24,000 Oldest cost of $8 & $9 per unit to value inventory Ending Inventory 2,500 $ 9.00 $ 22,500 Ending Inventory - total 5,500 46,500 Cost of goods sold 12,000 118,000 =164,500-46,500=118,000 Inventory sheet - Average weighted cost Date Decription Quantity Cost per unit Total cost 1-Jan Beginning Inventory 3,000 $ 8.00 $ 24,000 5-Mar Purchase 9,500 $ 9.00 $ 85,500 19-Sep Purchase 5,000 $ 11.00 $ 55,000 Goods Available for Sale 17,500 $ 9.40 $ 164,500 Weighted avg cost per unit = 164,500/17,500 = $9.40 per unit Ending Inventory 5,500 $ 9.40 $ 51,700 =5,500*9.40 = 51,700 Cost of goods sold 12,000 112,800 =164,500-51,700=112,800