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Chapter 6: 15E_2 (page 361)

Question:Super Mart, a regional convenience store chain, maintains milk inventory by the gallon.

The first month鈥檚 milk purchases and sales at its Freeport, Florida, location follow:

Nov. 2 Purchased 11 gallons @ \(2.15 each

6 Purchased 2 gallons @ \)2.80 each

8 Sold 6 gallons of milk to a customer

13 Purchased 3 gallons @ $2.85 each

14 Sold 4 gallons of milk to a customer

Requirements

2. Determine the amount that would be reported in ending merchandise inventoryon November 15 using the LIFO inventory costing method

Short Answer

Expert verified

The ending inventory on Nov.15 amounts to$12.9

Step by step solution

01

Step-by-Step-SolutionStep1: Perpetual Inventory LIFO Method

The Perpetual Inventory method is a system of maintaining inventory records continuously after every purchase and sale. LIFO is a method of allocating cost based on issuing assumption of last in first out.

So perpetual inventory under the LIFO method maintains the continuous record of inventory based on the last in first out assumption.

02

Calculation of ending inventory

Date

Purchase/opening

Sales

Balance

Units

Cost per unit

Amount

Units

Cost per unit

Amount

Units

Cost per unit

Amount

Nov 2

11

$2.15

$23.65

11

$2.15

$23.65

6

2

$2.80

$5.6

11

2

$2.15

$2.80

$29.25

8

2

4

$2.80

$2.15

$14.2

7

$2.15

$15.05

13

3

$2.85

$8.55

7

3

$2.15

$2.85

$23.6

14

3

1

$2.85

$2.15

$10.7

6

$2.15

$12.9

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Most popular questions from this chapter

Some of M and C Electronics鈥檚 merchandise is gathering dust. It is now December 31, 2018, and the current replacement cost of the ending merchandise inventory is \(24,000 below the business鈥檚 cost of the goods, which was \)97,000. Before any adjustments at the end of the period, the company鈥檚 Cost of Goods Sold account has a balance of $380,000.

Requirements

3. At what amount should the company report cost of goods sold on the income statement?

Question:The periodic inventory records of Flexon Prosthetics indicate the following for the month of July:

Jul. 1 Beginning merchandise inventory 6 units @ \( 60 each

8 Purchase 5 units @ \) 67 each

15 Purchase 10 units @ \( 70 each

26 Purchase 5 units @ \) 85 each

At July 31, Flexon counts four units of merchandise inventory on hand.

Compute ending merchandise inventory and cost of goods sold for Flexon using theLIFO inventory costing method.

Question:Golf Unlimited carries an inventory of putters and other golf clubs. The sales price of each putter is \(119. Company records indicate the following for a particular line ofGolf Unlimited鈥檚 putters:

Date Item Quantity Unit Cost

Nov. 1 Balance 24 \) 53

6 Sale 20

8 Purchase 30 70

17 Sale 30

30 Sale 2

Requirements

2. Journalize Golf Unlimited鈥檚 inventory transactions using the FIFO inventory costingmethod. (Assume purchases and sales are made on account.)

Assume that AB Tire Store completed the following perpetual inventory transactions for a line of tires:

May 1 Beginning merchandise inventory 16 tires @ \( 65 each

11 Purchase 10 tires @ \) 78 each

23 Sale 12 tires @ \( 88 each

26 Purchase 14 tires @ \) 80 each

29 Sale 18 tires @ $ 88 each

Requirements

1. Compute cost of goods sold and gross profit using the FIFO inventory costing method.

Futuristic Electronic Center began October with 65 units of merchandise inventory that cost \(82 each. During October, the store made the following purchases:

Oct. 3 25 units @ \) 90 each

12 30 units @ \( 90 each

18 35 units @ \) 96 each

Futuristic uses the periodic inventory system, and the physical count at October 31 indicates that 80 units of merchandise inventory are on hand.

Requirements

3. Which method will result in the lowest income taxes for Futuristic? Why? Which method will result in the highest net income for Futuristic? Why?
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