Question

Question 4: (4 marks each case 2 mark) Alhekma Company reports the following for the month of December Date Explanation Units Unit Cost Total Cost Dec. 1 Inventory 30 $ 100 $ 3,000 Dec. 12 Purchases 50 $ 103 $ 5,150 Dec. 19 Purchases 20 $ 99$ 1,980 Dec. 26 Purchases 30 $ 88$ 2,640 Total 130 $ 12,770 Instructions 1. Show computations to value the ending inventory using the FIFO cost assumption if 50 units remain on hand at December 31. 2. Show computations to value the ending inventory using the LIFO cost assumption if 50 units remain on hand at December 31.

Answer 1

Date : LL solution H 1 (FIFO Cost assumption) Ending Inventory remained in units = 50 unit Total Inventory burchased during december month = 130 units sold out Inventory = 130 - 50 So unite under FIFO Cost assumption, units first prochased or receipt are sold or issued first. As per this concept, 6 value of ending Inventory should be as follower $ 4620 Dec. 19 zounit x $99 = $1980 - Dec. 26 30 unit x $88 = $2640 Dec. 31 50 units Receipts before December 19 is sold it out or issued thits & their respected thi't lost. at

Date : solution #20 CLIFO Cost cassumption) under LIFO Cost assumption, thits purchased just before e sales or issues are sold out of issued first. That's why this the assumption is known as last in first cold out. As per this assumption, or value of ending inventory te is Cael Culated as follows: Dec. 12 20 unit x $103= $2060 Dec. 1 30 unit x $ 100 = $3000 Delo 31 50 unit $5060 value of 50 unit = $5060 Purchases or receipts between Dec. 12 to Dec. 26 are a Sold out of issued considerina the ending Inventory Balance of 50 units