Lobster Company had a beginning inventory on January 1 of 150 units of Product B

Question

Lobster Company had a beginning inventory on January 1 of 150 units of Product BU-54 at a cost of $20 per unit. During the year, the following purchases were made. Mar. 15, 400 units at $23 Sept. 4, 350 units at $26 July 20, 250 units at $24 Dec. 2, 100 units at $29
1,000 units were sold. Lobster Company uses a periodic inventory system.


Instructions
(a) Determine the cost of goods available for sale.


(b) 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.

(c) 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

a Units Unit Cost Total Cost Opening Inventory           January 1 150 20 3000 15-Mar 400 23 9200 20-Jul 250 24 6000 4-Sep 350 26 9100 2-Dec 100 29 2900 Total 1250 $30,200 Selling Units 1000 Ending Inventory 250 units b 1 FIFO Units Unit Cost Total Cost 1-Jan 150 20 3000 15-Mar 400 23 9200 20-Jul 250 24 6000 4-Sep 200 26 5200 Cost of Goods Sold 1000 23400 Cost of Closing inventory 150 26 3900 100 29 2900 250 6800 2 LIFO Units Unit Cost Total Cost 2-Dec 100 29 2900 4-Sep 350 26 9100 20-Jul 250 24 6000 15-Mar 300 23 6900 Cost of Goods Sold 1000 24900 Cost of Closing Inventory 100 23 2300 150 20 3000 250 5300 3 Average Cost Average cost = (20+23+24+26+29) / 5 = $24.4 Cost of goods sold = 1000 * 24.4 = $24,400 Closing inventory value = 250 * 24.4 = $6,100 FIFO LIFO Average Cost Cost of Goods Sold 23400 24900 24400 Closing Inventory Value 6800 5300 6100 c 1 Highest Inventory Amount for Balance sheet Closing inventory as per FIFO = $6,800 2 Highest Cost of Goods Sold for Income statement COGS as per LIFO = $24,900 a Units Unit Cost Total Cost Opening Inventory           January 1 150 20 3000 15-Mar 400 23 9200 20-Jul 250 24 6000 4-Sep 350 26 9100 2-Dec 100 29 2900 Total 1250 $30,200 Selling Units 1000 Ending Inventory 250 units b 1 FIFO Units Unit Cost Total Cost 1-Jan 150 20 3000 15-Mar 400 23 9200 20-Jul 250 24 6000 4-Sep 200 26 5200 Cost of Goods Sold 1000 23400 Cost of Closing inventory 150 26 3900 100 29 2900 250 6800 2 LIFO Units Unit Cost Total Cost 2-Dec 100 29 2900 4-Sep 350 26 9100 20-Jul 250 24 6000 15-Mar 300 23 6900 Cost of Goods Sold 1000 24900 Cost of Closing Inventory 100 23 2300 150 20 3000 250 5300 3 Average Cost Average cost = (20+23+24+26+29) / 5 = $24.4 Cost of goods sold = 1000 * 24.4 = $24,400 Closing inventory value = 250 * 24.4 = $6,100 FIFO LIFO Average Cost Cost of Goods Sold 23400 24900 24400 Closing Inventory Value 6800 5300 6100 c 1 Highest Inventory Amount for Balance sheet Closing inventory as per FIFO = $6,800 2 Highest Cost of Goods Sold for Income statement COGS as per LIFO = $24,900
Thank you.... a Units Unit Cost Total Cost Opening Inventory           January 1 150 20 3000 15-Mar 400 23 9200 20-Jul 250 24 6000 4-Sep 350 26 9100 2-Dec 100 29 2900 Total 1250 $30,200 Selling Units 1000 Ending Inventory 250 units b 1 FIFO Units Unit Cost Total Cost 1-Jan 150 20 3000 15-Mar 400 23 9200 20-Jul 250 24 6000 4-Sep 200 26 5200 Cost of Goods Sold 1000 23400 Cost of Closing inventory 150 26 3900 100 29 2900 250 6800 2 LIFO Units Unit Cost Total Cost 2-Dec 100 29 2900 4-Sep 350 26 9100 20-Jul 250 24 6000 15-Mar 300 23 6900 Cost of Goods Sold 1000 24900 Cost of Closing Inventory 100 23 2300 150 20 3000 250 5300 3 Average Cost Average cost = (20+23+24+26+29) / 5 = $24.4 Cost of goods sold = 1000 * 24.4 = $24,400 Closing inventory value = 250 * 24.4 = $6,100 FIFO LIFO Average Cost Cost of Goods Sold 23400 24900 24400 Closing Inventory Value 6800 5300 6100 c 1 Highest Inventory Amount for Balance sheet Closing inventory as per FIFO = $6,800 2 Highest Cost of Goods Sold for Income statement COGS as per LIFO = $24,900

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.