Question

Cells with non-gray backgrounds are protected and cannot be edited. 

An astensk (*) will appear to the night of an incorrect entry. Only final inventory cost-Column K - will be graded. 

 Based on the above data, inventory will be higher using the first in first out method.

EX 6-5 Perpetual inventory using LIFO 

Beginning inventory, purchases, and sales data for prepaid cell phones for December  are as follow:

a. Assuming that the perpetual inventory system is used, costing by the LIFO method, determine the cost of goods sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 4. 

b. Based upon the preceding data, would you expect the inventory to be higher or lower using the first-in, first-out method? 

Answer 1

6-5

a) Using LIFO

Prepaid Cell Phones
Date	Purchases			Cost of goodss sold			Inventory
	Qty	Rate	Value	Qty	Rate	Value	Qty	Rate	Value
Dec.1							310	$        88	$        27,280
Dec.10	144	$        90	$        12,960				310	$        88	$        27,280
							144	$        90	$        12,960
Dec.12				144	$        90	$        12,960	214	$        88	$        18,832
				96	$        88	$          8,448
Dec.14				166	$        88	$        14,608	48	$        88	$          4,224
Dec.20	240	$        96	$        23,040				48	$        88	$          4,224
							240	$        96	$        23,040
Dec.31				200	$        96	$        19,200	48	$        88	$          4,224
							40	$        96	$          3,840
Dec.31	Balances					$        55,216			$          8,064

b)

When the FIFO method used inventory value is higher because of the latest purchases which are in closing inventory purchased at a higher price.

EX-6-6 : Using FIFO

Prepaid Cell Phones
Date	Purchases			Cost of goodss sold			Inventory
	Qty	Rate	Value	Qty	Rate	Value	Qty	Rate	Value
Dec.1							310	$        88	$        27,280
Dec.10	144	$        90	$        12,960				310	$        88	$        27,280
							144	$        90	$        12,960
Dec.12				240	$        88	$        21,120	70	$        88	$          6,160
							144	$        90	$        12,960
Dec.14				70	$        88	$          6,160	48	$        90	$          4,320
				96	$        90	$          8,640
Dec.20	240	$        96	$        23,040				48	$        90	$          4,320
							240	$        96	$        23,040
Dec.31				48	$        90	$          4,320	88	$        96	$          8,448
				152	$        96	$        14,592
Dec.31	Balances					$        54,832			$          8,448