Question

100 Irish Company uses the periodic inventory method and had the following inventory information available: Units Unit Cost Total Cost 1/1 Beginning Inventory $ 500 1/20 Purchase 400 2,400 7/25 Purchase 200 1,400 10/20 Purchase 2,400 1.000 $6.700 A physical count of inventory on December 31 revealed that there were 480 units on hand. S6 300 Instructions Answer the following independent questions and show computations supporting your answers. 1. Assume that the company uses the FIFO method. The value of the ending inventory at December 31 is $_ 2. Assume that the company usop the Average-Cost method. The value of the ending inventory on December 31 is $ 3. Assume that the company uses the LIFO method. The value of the ending inventory on December 31 is s. 4. 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. Would income have been greater or less?

Answer 1

Date 1-1 1-20 7-25 10-20 Particulars Begining Inventory Purchase Purchase Purchase Total Units 100 400 200 300 1000 Price Cost $5.00 $500.00 $6.00 $2,400.00 $7.00 $1,400.00 $8.00 $2,400.00 $6,700.00 Units 480 Closing Inventory Price Value 1. Value of inventory using FIFO Units Closing inventory belongs to lot 300 P4 180 P3 7 $2,400.00 $1,260.00 $3,660.00 Total 1. Value of inventory using Average Cost Method Average cost = Total cost / Total Units Total Cost Total Units $6,700.00 1000 Average Cost $6.70 Closing Inventory (Units) Average Cost Value of Inventory 1000 $6.70 $6,700.00

Price Value 3. Value of inventory using LIFO Closing inventory Units belongs to lot 300 P1 180 5 $1,500.00 $1,080.00 $2,580.00 Total 4. Difference in income to be reported Value of Inventory FIFO $3,660.00 LIFO $2,580.00 Difference $1,080.00 The Income of comapny would be greater by $1080 if the company used FIFO instead of