Question

Periodic Inventory by Three Methods 

Dymac Appliances uses the periodic inventory system. Details regarding the inventory of appliances at January 1, purchases invoices during the next 12 months, and the inventory count at December 31 are summarized as follows: 

Answer 1

Calculate cost of inventory on December 31 by using First-In-First-Out method. DA Cost of Inventory - FIFO method December 31 ModelQuantity Unit cost Total cost $304 $76 $70 A10 4 2 A10 B15 B15 E60 G83 J34 M90 M90 Q70 Q70 $140 $184 $1,104 $340 $350 $259$2,331 $270$4,050 $390 $256 $180$1,260 $175 $10,700 2$170 $70 15 $130 $128 2 $175 Total

Calculate cost of inventory on December 31 by using Last-In-First-Out method. DA Cost of Inventory - LIFO method December 31 ModelQuantity Unit cost Total cost $64 $70 A10 A10 B15 E60 E60 G83 G83 J34 J34 M90 M90 M90 Q70 Q70 $256 $140 8$176 $1,408 $225 $130 $242 $1,694 $500 12 $240 $2,880 $738 $216 $220 $128 $800 $510 $9,845 4 2 $75 $65 7 $250 $246 $108 $110 1$%128 $160 $170 2 Total

3. Calculate cost of inventory on December 31 by using Weighted Average method. DA Cost of Inventory - Weighted Average Method December 31 ModelQuantityUnit cost Total cost $70 A10 B15 E60 G83 J34 M90 Q70 $420 $174$1,392 $345 $253$2.277 $258$3,870 $605 $172$1,376 $10,285 $69 15 $121 Total Working note: Calculate average cost per unit of the models M90 B15 $1,408 Particulars A10 E60 G83 J34 Q70 balance $216 $220 S384 S390$1.260 $225$1.694$2,880 $195$1,500$2,460 $800 $680 $700 ารเ purchase 2d purchase 3'° purchase Totals Units purchased Unit cost $256 $280 S304$1,104 $632 S510$1,020$1.300$4,272 $630$2,590$4,320 S840S3.654$2,070$7,084$13,932$1,210$3,440 12 $70 21 $174 54 $258 30 28 10 $121 20 $172 $69 S253

4. LIFO method would be preferred for income tax purposes in the periods of raising prices Explanation: Under LIFO method cost of goods sold is higher in the market for raising prices. The inventory purchased recently at higher price will be considered for cost of goods sold under LIFO method. This will bring down the income, tax benefit is available on the decreased ncome.