Question

QUESTION 5

1. Carpenter Corporation is a United Stated merchandising business. The corporation extensively uses scan technology in a perpetual inventory system; and in the past, the corporation has valued inventory using the LIFO cost flow assumption. Carpenter Corporation is seeking new markets outside the United States and wishes to restate its Inventory on the Financial Statements, based on International Financial Reporting Standards. Using the following information, and assuming that Carpenter Corporation will not use an average cost method of cost flows, what is the Cost of Merchandise Sold on the restated Income Statement which will be acceptable under both US GAAP and International IFRS, for the month ended September 30?

   Sep. 1         Inventory 24 units at $23

            4        Sold 11 units

          10        Purchased 34 units at $25

          17        Sold 20 units

          30        Purchased 10 units at $33

Answer 1

IFRS does not allowed LIFO inventory system and Carpenter Corporation will not use average cost
method, so FIFO method is to be used by the company as basis for inventory valuation and the same
method is acceptable under IFRS and GAAP.
Cost of merchandise sold on restated income statement :		Inventory in hand :
Sale Date (a)	Unit (b)	Cost at $ (c )	COGS (d = b x c)	Used of purchase			Date	unit	$
Sep 4th	11	23	253	Opening			Opening	24	23
Sep 17th	13	23	299	Opening			Sep 4th	-11	23
Sep 17th	7	25	175	Sep 10th			Balance	13	23
COMS		71					Sep 10th	34	25
Note: It is assumed per unit cost given				Balance	47	23/25
							Sep 17th	-20
So, cost of merchandise sold on the restated income statement	Balance	27	25
is $ 71.							Sep-30	10	33
							Closing	37	25/33