Question

4. Inventory transactions for Hal Easton Stores are summarized in the table below. The company uses the LIFO perpetual method for both financial and tax reporting. (Click the icon to view the inventory transactions.) The inventory footnote from Hal Easton Stores' annual report indicates that the difference between the LIFO costs and the current (FIFO) costs of inventory is equal to $0 and $16,200 at the beginning and end of the year, respectively. (Assume FIFO costs of ending inventory exceeded LIFO at the end of the current year.) Read the requirements2. Requirement a. Determine the ending inventory and cost of goods sold for the current year. Begin by preparing Hal Easton Stores' perpetual inventory record under the last-in, first-out (LIFO) method for the year. (When entering the layers for the units sold, enter the first layer sold under LIFO on the first available line, then the next layer sold under LIFO on the next line, and so on. CGS Cost of Goods Sold.) LIFO: CGS Units Unit Total Units Inventory per Transaction Purchased Cost Cost Sold Unit CGS Balance Beg. inventory Oldest layer Beg. inventory - Next oldest layer Purchase January 20 Purchase February 18 Sale May Purchase - July 28 Under the LIFO method, Hal Easton's total cost of ending inventory is $ and the cost of goods sold for the year is $ Requirement b. Use the footnote information provided in the question to convert the beginning and ending inventories from a LIFO to a FIFO basis. (Complete all answer boxes. Enter a "0" for any zero amounts.) Beginning of the End of the Year Year LIFO ending inventory LIFO reserve (difference) per footnote FIFO ending inventory Requirement c. Convert the cost of goods sold for the current year from the LIFO to the FIFO basis. LIFO cost of goods sold Adjustment FIFO cost of goods sold Requirement d. Compare the inventory turnover ratio for the current year computed under the two methods of inventory valuation. (Round the ratios to two decimal places, X.XX.) unbay

To the expert: I don't know what you mean by "more requirements, cut it"

The requirements are A, B C and D

Answer 1

LIFO =LAST IN FIRST OUT.

In lifo method the latest purchased goods are considered to be sold first.

	unit purchase	Unit cost	Total cost	unit sold	CGS per unit	CGS	Inventory Balance
Beg. oldest	1500	12	18000
Beg. Next Oldest	1700	14	23800				[18000+23800] 41,800
purchase January 20	5500	16	88000				[41800+88000] 129,800
January 18	9500	20	190000				[129800+190000] 319,800
Sales May 1				9500	20
				5500	16
				1000	14	292,000	[319800-292000] 27,800
Purchase july 28	15000	18	270000				[27800+270000] 297,800

cost of goods sold =9500*20+5500*16+1000*14 = 190000+88000+14000=292000

Req.A

cost on ending inventory is $297,800

cost of goods sold $292,000 [16000unit sold]

req B

	BEGINNING	END
LIFO	41800	297800
AJUSTMENT	0	16200
FIFO	41800	314,000	[297800+16200]

REQ C

Opening inventory + Purchase - cost of goods sold = ending inventory

41800(same as LIFO) + [88000+190000+270000]- CGS= [297800+16200] (ENDING INVENTORY IN FIFO IS 16200 MORE THAN LIFO)

=41800+548000-cgs= 314000

cgs under FIFO= 275,800$

REQD

	(1)		(2)	=	INVENTORY TURNOVER RATIO (3)
LIFO	292000	/	169800	=	1.72
FIFO	275800	/	177900	=	1.55

INVENTORY RATIO = COST OF GOODS SOLD/ AVERAGE INVENTORY

LIFO AVERAGE INVENTORY = OPENING+CLOSING /2

=(41800+297800) / 2

=169800

FIFO AVERAGE INVENTORY = OPENING+ CLOSING /2

=(41800+314000) /2

=177900

lifo method resulted into higher inventory ratio than fifo method.