Question

Bramble Company uses the periodic inventory method and had the following inventory information available: Units Unit Cost Total Cost 1/1 Beginning Inventory 124 $496 1/20 620 3 Purchase Purchase $ 5 $ 7 ,100 868 7/25 124 10/20 Purchase 372 2,976 1,240 $7,440 A physical count of inventory on December 31 revealed that there were 434 units on hand. Answer the following independent questions. (Round average cost per unit to 2 decimal places, e.g. 5.25 and final answers to 0 decimal places, e.g. 2,520.) 1. Assume that the company uses the FIFO method. The value of the ending inventory at December 31 is A Assume that the company uses the average cost method. The value of the ending inventory on December 31 is A 3. Assume that the company uses the LIFO method. The value of the ending inventory on December 31 is A A 4. (a) Determine the difference in the amount of income that the company would have reported if it had used the FIFO method instead of the LIFO method 4. (b) Would income have been greater or less?

Answer 1

Answer:

2 3,410 2,604 2,046 1,364 Greater 4(a) 4(b)

Working notes:

1. FIFO ending inventory = (372 x$8)+(62x$ 7) = $ 3,410 2. Average cost method ending inventory = $7,440/1,240 = $6x434 = $2,604 3. LIFO ending inventory = (124 x$4)+ (310x$5) = $ 2,046 4 (a) Cost of goods sold under FIFO = $7,440-$3,410=4,030 Cost of goods sold under LIFO = $7,440-$2,046=5,394 Difference in the amount of income = $5,394-4,030 =$1,364 4 (b) greater