Question

Print Question 1 Nor complete Marked out of 17.00 plag question Applying and Analyzing Inventory Costing Methods At the beginning of the current period, Chen carried 1,000 units of its product with a unit cost of $40. A summary of purchases during the current period follows. During the period. Chen sold 2,800 units Units Unit Cost Cost Beginning inventory 1.000 540 540.000 Purchase 1.800 44 79.200 Purchase 2 300 41.600 Purchase 1200 69.600 (a) Assume that Chen uses the first in first-out method. Compute both cost of good sold for the current period and the ending inventory balance. Use the financial statement effects template to record cost of goods sold for the period Ending inventory balance s Cost of goods sold

Answer 1

) FIFO Particular Ending Inventory Qty rot $ Receipt aty I rate 40 1800 44 cost of goods sold oty rate $ 1000 40 40,000 $ 40,000 79,200 Beginning Inventory 1000 Purchase #1 1800 44. 79,200 Purchase #2 800 52 41,600 800 52 41600 Puschare #3 1200 58 69600 1200 58 69600 Total 119200 111,200

Balance sheet Non cash + Assets = Liabilities + cash Assets Transaction contributed capital + Earned capital Recekd FIFO Cost Of goods sold 0 - 119,200 = 0 0 -119,200 Income Statement Net Revenue Expense Income -119,200 - 119,200

(6) LIFO $ Receipt Particular oty Irate Beginning inventory 1000 40 Purchase #1 1800 44 Cost of goods sold Coty rate $ Ending Inventory oty rate $ 1000 40 40,000 40,000 79,200 800 44+ 35,200 1000 44 44,000 | Purchase #2 800 52 41,600 800 52 41,600 Purchase #3 1200 58 69,600 1200 58 69,600 -- 84,000 Total 146400

(c) calculation of Average Cost pel Unit Average Total cost Cost Total No. g units 40,000 + 79200 + 4600 +69600 1000 + 1800 + 800 +1200 = $ 230400 4800 $48 - Ending Inventory = (total unit - Sold unite)x Aug. cost per unit (4800 - 2800 J* $48 2000 x $48 = $96000 Cost of goods sold sold units x Aug. Cost per unit 2800 units x $48 $ 134,400 (d) (1) FIFO - Because old stock is sold first. (2) LIFO - Because latest stock is sold first, which decreases the net income. If net income decreases Tax also decreases. (3) FIFO - Because old stock is sold first, due to which income increases.

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