The Audiophile sells high-performance stereo equipment. During the current year,
ID: 2348970 • Letter: T
Question
The Audiophile sells high-performance stereo equipment. During the current year, The Audiophile began purchasing a new state-of-the-art speaker system at the following dates and acquisition costs: Total cost Oct. 1 2 @ $3000 $ 6,000 Nov. 17 3 @ $3200 $ 9,600 Dec. 1 4 @ $3250 $13,000 COGAFS 9 units $28,600 On November 21, The Audiophile sold 4 of the new speaker systems for $5000 each. The other 5 units remained in inventory at December 31. REQUIRED: A. Assuming that Audiophile uses a perpetual inventory system, compute (i) the COGS (ii) Ending Inventory, and (iii) gross profit using each of the following inventory cost assumptions. Put your answer in the table below. i. COGS ii. Ending Inv. iii. Gross profit i. FIFO ii. LIFO iii. Average cost B. Assuming that Audiophile uses a periodic inventory system, compute the i) COGS, ii) Ending inventory, and iii) Gross profit using each of the following inventory cost assumptions. Put your answer in the table below. i. COGS ii. Ending Inv. iii. Gross profit i. FIFO ii. LIFO iii. Average costExplanation / Answer
(1) Cost of goods sold (at average cost):
Average unit cost ay Nov.21
[($6,000+$9,600) /5 units]=$3,120
Cost goods sold (4units*$3,120 per unit)=$12,480
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(2) Inventory at Dec.31 (at average cost) :
Average unit cost at Dec.31:
Units remaining offer sale of Nov.21
(1 unit *$3,120)=$3,120
unit purchased on Dec.1 (4units *$3,250)=$13,000
Total cost of 5 units in inventory=$16,120
Average unit cost at Dec.31= $3,224
Inventory at Dec.31 (5 units * $3,224 per unit)=$16,120
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B. (1) Cost of goods sold (FIFO basis): (2units * $3,000
+2units*$3,200)=$12,400
(2) Inventory at Dec.31 (4units *$3,250 +1unit *$3,200)= $16,200
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C. (1) Cost of goods sold (LIFO basis): (3units*$3,200+1unit*3,000)=$12,600
(2) Inventory at Dec.31 (4units * $3,250+1unit*$3,000)=$16,000
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