Question

Determine cost of goods sold and ending inventory using FIFO, LIFO, and average-cost with analysis.

(LO 2)

Glee Distribution markets CDs of the performing artist Unique. At the beginning of October, Glee had in beginning inventory 2,000 of Unique's CDs with a unit cost of $7. During October, Glee made the following purchases of Unique's CDs.

Oct. 3 2,500 @ $8

Oct. 19 3,000 @ $10

Oct. 9 3,500 @ $9

Oct. 25 4,000 @ $11

During October, 10,900 units were sold. Glee uses a periodic inventory system.

Instructions

Determine the cost of goods available for sale.

Determine (1) the ending inventory and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost). Prove the accuracy of the cost of goods sold under the FIFO and LIFO methods.

FIFO

$94,500

LIFO

$108,700

Average

$101,370

Which cost flow method results in (1) the highest inventory amount for the balance sheet and (2) the highest cost of goods sold for the income statement?

Oct. 3 2,500 @ $8

Oct. 19 3,000 @ $10

Oct. 9 3,500 @ $9

Oct. 25 4,000 @ $11

During October, 10,900 units were sold. Glee uses a periodic inventory system.

Instructions

(a) 

Determine the cost of goods available for sale.

(b) 

Determine (1) the ending inventory and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost). Prove the accuracy of the cost of goods sold under the FIFO and LIFO methods.

(2) Cost of goods sold:

FIFO

$94,500

LIFO

$108,700

Average

$101,370

(c) 

Which cost flow method results in (1) the highest inventory amount for the balance sheet and (2) the highest cost of goods sold for the income statement?

 

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