E7-14 Analyzing and Interpreting the Effects of the LIFO/FIFO Choice on Inventor

Question

E7-14 Analyzing and Interpreting the Effects of the LIFO/FIFO Choice on Inventory Turnover Ratio [LO 7-2, LO 7-3, LO 7-5]

Simple Plan Enterprises uses a periodic inventory system. Its records showed the following:

Compute the number and cost of goods available for sale, the cost of ending inventory, and the cost of goods sold under FIFO and LIFO.

       

Compute the inventory turnover ratio under the FIFO and LIFO inventory costing methods. (Round your answers to 2 decimal places.)

       

Simple Plan Enterprises uses a periodic inventory system. Its records showed the following:

Inventory, December 31, using FIFO ? 40 Units @ $15 = $600 Inventory, December 31, using LIFO ? 40 Units @ $11 = $440

Explanation / Answer

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LIFO Method Periodic Inventory method Cost of goods available for sale Date Explanation Units Per unit Total Jan.1 Beginning inventory              40                 11           440 jan.9 Purchase              52                 16           832 Jan.20 Purchase            102                 17        1,734 Total            194        3,006 Ending inventory Date Units Per unit Total Jan.1                                     40              11               440 jan.9                                     14              16               224 Total                                     54               664 Cost of goods available for sale            3,006 Less: Ending inventory               664 Cost of goods sold            2,342

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