91Ó°ÊÓ

1) By using LIFO Method

$\begin{array}{rcl}\mathrm{Ending}\mathrm{Inventory}\left(\mathrm{Units}\right)& =& \mathrm{Total}\mathrm{Available}\mathrm{goods}\mathrm{for}\mathrm{sale}-\mathrm{Total}\mathrm{Sale}\\ & =& (300+800-500)-(200+500+300)\\ & =& (1,600-1,000)\\ & =& 600\mathrm{Units}\end{array}$

$\begin{array}{rcl}\mathrm{Value}\mathrm{of}\mathrm{ending}\mathrm{inventory}& =& \mathrm{Beginning}\mathrm{Inventory}\mathrm{Value}+\mathrm{June}11\mathrm{Purchase}\mathrm{value}\mathrm{for}300\mathrm{units}\\ & =& 300×\$10+300×\$12\\ & =& \$3,000+\$3,600\\ & =& \$6,600\end{array}$

$\begin{array}{rcl}\mathrm{Cost}\mathrm{of}\mathrm{goods}\mathrm{sold}& =& \mathrm{Value}\mathrm{of}\mathrm{total}\mathrm{inventory}\mathrm{available}\mathrm{for}\mathrm{sale}-\mathrm{Value}\mathrm{of}\mathrm{ending}\mathrm{Inventory}\\ & =& (300×\$10+800×\$12+500×\$13)-\$6,600\\ & =& \$19,100-\$6,600\\ & =& \$12,500\end{array}$

2) By using FIFO method

$\begin{array}{rcl}\mathrm{Ending}\mathrm{Inventory}\left(\mathrm{Units}\right)& =& \mathrm{Total}\mathrm{Available}\mathrm{goods}\mathrm{for}\mathrm{sale}-\mathrm{Total}\mathrm{Sale}\\ & =& (300+800-500)-(200+500+300)\\ & =& (1,600-1,000)\\ & =& 600\mathrm{Units}\end{array}$

$\begin{array}{rcl}\mathrm{Cost}\mathrm{of}\mathrm{goods}\mathrm{sold}& =& \mathrm{Value}\mathrm{of}\mathrm{total}\mathrm{inventory}\mathrm{available}\mathrm{for}\mathrm{sale}-\mathrm{Value}\mathrm{of}\mathrm{ending}\mathrm{Inventory}\\ & =& (300×\$10+800×\$12+500×\$13)-\$7,700\\ & =& \$19,100-\$7,700\\ & =& \$11,400\end{array}$

$\begin{array}{rcl}\mathrm{Value}\mathrm{of}\mathrm{ending}\mathrm{inventory}& =& \mathrm{Beginning}\mathrm{inventory}+\mathrm{Total}\mathrm{purchases}-\mathrm{Cost}\mathrm{of}\mathrm{goods}\mathrm{sold}\\ & =& \$3,000+(\$9,600+\$6,500)-\$11,900\\ & =& \$19,100-\$11,900\\ & =& \$7,200\end{array}$

$\begin{array}{rcl}\mathrm{Gross}\mathrm{Profit}& =& \mathrm{Total}\mathrm{sales}\mathrm{value}-\mathrm{Cost}\mathrm{of}\mathrm{goods}\mathrm{sold}\\ & =& (200×\$24+500×\$25+300×\$27)-\$11,700\\ & =& \$25,400-\$11,700\\ & =& \$13,700\end{array}$

Under the LIFO method, the cost of goods sold is valued at the current prices as only the latest inventory cost is taken for computation. Whereas, under FIFO, historical costs are used for computing COGS.

Current costs are generally higher than the historical cost. So the COGS would be higher under LIFO than FIFO.

Thus the gross profit would be reported lower under the LIFO method.