Question

& Information for Koetteritz Inc. for the month en 135 P6.54 (LO 2) You are provided with the following information for Koetteritz inc. June 30, 2020. Koetteritz uses the periodic method for inventory Unit Cost or Date Selling Price Quantity Description $40 June 1 Beginning inventory 40 43 June 4 Purchase June 10 70 Sale 110 June 11 Sale return 1 15 70 June 18 Purchase 146 June 18 Purchase return 10 bodromo 46 June 25 Sale June 28 Purchase 35 50 Instructions ton 65 76 a. Calculate (i) ending inventory, (ii) cost of goods sold, (iii) gross profit, and (iv) gross P under each of the following methods. (1) LIFO. (2) FIFO. (3) Average-cost. b. Compare results for the three cost flow assumptions.

Answer 1

Solution Calculate the cost of goods available for sale Particulars Units Unit cost Total cost Date Beginning Inventory $1,600 June 1 $40.00 40 $43.00 Purchases June 4 $5,805 135 Purchases (55-10) June 18 $46.00 $2,070 45 June 28 Purchases 35 $50.00 $1,750 Total $11,225 255 Cost of goods available for sale $11,225 Number of units available for sale 255 units Calculate the Ending Inventory units Total Units available for sale 255 Total units sold (110-15+65) 160 Ending inventory units 95 Required a. FIFO Method Under FIFO method, inventories first purchased are issued issued We can calculate the Cost of Goods sold under FIFO method as under Units issued Rate COGS $40.00 $43.00 $1,600 40 120 $5,160 $6,760 160 Cost of goods sold (FIFO Method) $6,760

Ending Inventory (FIFO Method) Ending inventory = Cost of goods available for sale - Cost of goods sold =$11,225 - $6,760 $4,465 LIFO Method Under LIFO method, inventories last purchased are issued issued We can calculate the Cost of Goods sold under LIFO method as under: Units issued Rate COGS $50.00 $46.00 35 ,750 $2,070 $3,440 $7,260 45 80 $43.00 160 Cost of goods sold (LIFO Method) $7,260 Ending Inventory (LIFO Method Ending inventory = Cost of goods available for sale - Cost of goods sold $11,225 - $7,260 = $3,965 Average-cost Method Total cost/Total units Average unit cost $11,225/255 $44.02

Cost of goods sold Units sold x Average unit cost = 160 units x $44.02 $7,043.10 Total ending inventory Ending inventory units x Average unit cost = 95 units x $44.02 $4,181.90 Compute gross profit under each cost assumption Step-1: Compute Sales Revenue Selling price Per unit Units Sold Sales $7,700 ($1,050) $4,940 $11,590 $70.00 110 $70.00 -15 $76.00 65 160 Average FIFO LIFO Cost Sales $11,590 $11,590 $11,590.00 $6,760 $4,830 41.67% $7,260 $4,330 37.36% $7,043.10 Less: Cost of Good sold Gross profit Gross profit rate $4,546.90 39.23% Required b Average FIFO LIFO Cost Ending inventory Cost of goods sold Gross profit Gross profit rate $4,465 $3,965 $4,181.90 $7,043.10 $4,546.90 39.23% $7,260 $4,330 37.36% $6,760 $4,830 41.67% FIFO method provides the highest Gross profit.