Question

Lopez Company reported the following current-year data for its only product. The company uses a periodic inventory system and its ending inventory consists of 360 units-120 from each of the last three purchases Dan. 1 Beginning inventory Mar. 7 Purchase July 28 Purchase Oct. 3 Purchase Dec. 19 Purchase 220 units $2.80$616 480 units$3.251,560 1,120 units $3.303,696 1,000 units$3.603,600 400 units $4.10 1,640 Totals 3,220 units $ 11,112 Determine the cost assigned to ending inventory and to cost of goods sold for the following. (Do not round intermediate calculations and round your answers to 2 decimal places.) Ending ost of Goods Sold Inventory $ 1,320.009,792.00 $ 1,242.36 (a) Specific identification (b) Weighted average (c) FIFO (d) LIFO 1,476.00 9,636.00 Which method yields the highest net income? O Weighted average O FIFO LIFO Specific identification

Answer 1

Solution:-

Given data:-

(a) Finding Specification identification:-

Cost of ending inventory=$1,320.00

Cost of goods sold = $9792.00

(b) Finding Weighted average:-

Total cost of inventory = $11,112

Units available=220+480+1120+1000+400

Total Units available = 3220 units

Cost per unit = $11,112 / 3220

Cost per unit = $3.45

Cost of ending inventory=$1,242.36

Cost of goods sold = Cost of ending inventory - Cost per unit

= $1,242.36 - $3.45

= $1238.91

Cost of goods sold = $1238.91

(c)Finding FIFO:-

Cost of ending inventory=$1,476.00

Cost of goods sold = $9636.00

(d)Finding LIFO:-

220 units from Beginning inventory 220*$2.00 = $440

124 units from March 7 purchase 124*$3.25=$403

Total ending inventory = $440 + $403

Total ending inventory = $843

Cost of goods sold = $11,112 - $843

Cost of goods sold = $10269

Hence LIFO yields the highest net income.

So,option 'c' is correct.