During March 12,500 units were sold. Glanville uses a periodic inventory system.

Question

  During March 12,500 units were sold. Glanville uses a periodic inventory system.

P6-2A Glanville Distribution markets CDs of the performing artist Harrilyn Clooney.  At the beginning of March, Glanville had in beginning inventory   1,500 Clooney CDs with a unit cost of $7. During March Glanville made the following purchases of Clooney CDs.   March 5 3,000 @ $8 March 21 4,000 @ $10 March 13 5,500 @ $9 March 26 2,000 @ $11

  During March 12,500 units were sold. Glanville uses a periodic inventory system.

Glanville Distribution markets CDs of the performing artist Harrilyn Clooney. At the beginning of March, Glanville had in beginning inventory 1,500 Clooney CDs with a unit cost of $7. During March Glanville made the following purchases of Clooney CDs. During March 12,500 units were sold. Glanville uses a periodic inventory system. 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. (Round answers to 0 decimal places, e.g. 125.) 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?

Explanation / Answer

March 1 1,500 @ $7; $10,500
March 5 3,000 @ $8; $24,000
March 13 5,500 @ $9; $49,500
March 21 4,000 @ $10; $40,000
March 26 2,000 @ $11; $22,000
Total 16,000 units; $146,000; Ave. cost $9.125
Sold 12,500 units
Ending inventory 3500 units

FIFO
2,000 @ $11; $22,000
1,500 @ $10; $15,000
Ending inventory 3,500 units; $37,000 (highest balance sheet amount)
COGS $146,000 - $37,000 = $109,000

LIFO
1,500 @ $7; $10,500
2,000 @ $8; $16,000
Ending inventory 3,500 units; $26,500
COGS $146,000 - $26,500 = $119,500 (highest COGS)

Average Cost
Ending inventory 3,500 units @ $9.125; $31,937.50 rounded to $31,938.
COGS $146,000 - $31,938 = $114,062

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