Effect of cost flow on ending inventory: intermittent sales and purchases
Solar Heating, Inc., had the following transactions for 2011:
Date | Transaction | Description |
Jan. 1 | Beginning inventory | 50 units @ $20 |
Mar. 15 | Purchased | 200 units @ $24 |
May 30 | Sold | 170 units @ $40 |
Aug. 10 | Purchased | 275 units @ $25 |
Nov. 20 | Sold | 340 units @ $40 |
Required
a. Determine the quantity and dollar amount of inventory at the end of the year, assuming Solar Heating Inc. uses the FIFO cost flow assumption and keeps perpetual records.
b. Write a memo explaining why Solar Heating, Inc., would have difficulty applying the LIFO method on a perpetual basis. Include a discussion of how to overcome these difficulties.
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