Question

The following information is available concerning the inventory of Carter Inc.: Units Unit Cost 206 $9 Beginning inventory Purchases: March 5 305 10 June 12 403 11 August 23 255 12 October 2 152 14 During the year, Carter sold 1,001 units. uses a periodic inventory system. Required: 1. Calculate ending inventory and cost of goods sold for each of the following three methods: In your calculations round average unit cost to the nearest cent, and round all other calculations and your final answers to the nearest dollar. Cost Flow Assumption Ending Inventory Cost of Goods Sold a. Weighted average b. FIFO $ C. LIFO 2. Assume an estimated tax rate of 30%. How much more or less (indicate which) will Carter pay in taxes by using FIFO instead of LIFO? Difference in taxes under FIFO VS. LIFO

Answer 1

Periodic : FIFO Goods Purchasd Cost of Goods Sold Inventory Balance cost of Goods # of Units Cost Per Cost of Cost Per Ending Cost Per Unit Available for sales sold Unit Goods Sold # of Units Unit Inventory 206 9 1854 206 9 1854 0 0 0 # of Units Beginning inventory Purchases Mar-05 Jun-12 Aug-23 Oct-02 Totals 305 403 255 152 1321 10 11 12 14 3050 4433 3060 2128 14525 305 403 87 0 1001 10 11 12 14 3050 4433 1044 0 10381 0 168 152 320 10 11 12 14 0 2016 2128 4144 Periodic : LIFO Goods Purchasd Cost of Goods Sold Inventory Balance cost of Goods # of Units Cost Per Cost of Cost Per Ending Cost Per Unit Available for sales sold Unit Goods Sold # of Units Unit Inventory 9 1854 0 9 0 206 9 1854 206 10 # of Units Beginning inventory Purchases Mar-05 Jun-12 Aug-23 Oct-02 Totals 11 305 403 255 152 1321 3050 4433 3060 2128 14525 191 403 255 152 1001 10 11 12 14 12 14 1910 4433 3060 2128 11531 114 0 0 0 320 10 11 12 14 1140 0 0 0 2994

Periodic : Weighted Average Goods Purchasd Cost of Goods Sold Inventory Balance Cost Per Ending # of Units Unit Inventory # of Units cost of Goods # of Units Cost Per Cost of Available for sales sold Unit Goods Sold Cost Per Unit 206 9 1854 Beginning inventory Purchases Mar-05 Jun-12 Aug-23 Oct-02 Totals 305 403 255 152 1321 10 11 12 14 11.00 3050 4433 3060 2128 14525 1001 11.00 11011 320 11.00 3520 Weighted Average FIFO LIFO Answer Ending inventory Cost of Goods Sold 3520 11011 4144 10381 2994 11531 Difference in Gross Profit between FIFO LIFO = 11531-10381 Diiference in tax under FIFO Vs LIFO = 1150*30% 1150 345