Inventory information for Part 311 of Monique Aaron Corp. discloses the followin

Question

Inventory information for Part 311 of Monique Aaron Corp. discloses the following information for the month of June.

a. Assuming that the periodic inventory method is used, compute the cost of goods sold and ending inventory under (1) LIFO and (2) FIFO.

B) Assuming that the perpetual inventory method is used and costs are computed at the time of each withdrawal, what is the value of the ending inventory at LIFO?

C) Assuming that the perpetual inventory method is used and costs are computed at the time of each withdrawal, what is the gross profit if the inventory is valued at

D) Why is it stated that LIFO usually produces a lower gross profit than FIFO?

Exercise 8-18 The board of directors of Ichiro Corporation is considering whether or not it should instruct the accounting department to shift from a first-in, first-out (FIFO) basis of pricing inventories to a last-in, first-out (LIFO) basis. The following information is available. Sales 20,800 units @ $75 Inventory, January 1 6,620 units @ 30 Purchases 6,910 units @ 33 10,300 units @ 37 7,910 units @ 45 Inventory, December 31 10,940 units @ ? Operating expenses $299,800 Prepare a condensed income statement for the year on both bases for comparative purposes.

June 1 Balance 303 units @ $14 June 10 Sold 203 units @ $34 11 Purchased 800 units @ $17 15 Sold 503 units @ $35 20 Purchased 497 units @ $18 27 Sold 303 units @ $38

Explanation / Answer

Ans

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Ans A Perodical LIFO Units Rate Closing Inventory Opening lot                  303.00 14     4,242.00 Purchased on 11                  288.00 17     4,896.00                  591.00     9,138.00 Opening Inventory 303 14     4,242.00 Purchase Jun-11 800 17 13,600.00 Jun-20 497 18     8,946.00 Total Purchases 22,546.00 Closing Inventory     9,138.00 COGS=Opening Inventory+Purchases-Closing Inventory 17,650.00 Periodical FIFO Units Rate Ending Inventory Purchased on 20 497 18     8,946.00 Purchased on 11 94 17     1,598.00 591 10,544.00 Opening Inventory 303 14     4,242.00 Purchase Jun-11 800 17 13,600.00 Jun-20 497 18     8,946.00 Total Purchases 22,546.00 Closing Inventory 10,544.00 COGS=Opening Inventory+Purchases-Closing Inventory 16,244.00 Ans B Perpetual LIFO Units Rate Value COGS for Jun 10 sale                  203.00         14.00     2,842.00 COGS for Jun 15 sale                  503.00         17.00     8,551.00 COGS for Jun 27 sale                  303.00         18.00     5,454.00 16,847.00 Closing Inventory Opening Lot 100 14     1,400.00 Jun 11 Purchase 297 17     5,049.00 Jun 20 Purchase 194 18     3,492.00                  591.00     9,941.00 Perpetual LIFO Gross Profit Ans C (1) Sales 203 34     6,902.00 503 35 17,605.00 303 38 11,514.00 Total Sales              1,009.00 36,021.00 Cost of Goods Sold 16,847.00 Gross Profit 19,174.00 Ans C (2) Perpetual FIFO Gross Profit Sales 203 34     6,902.00 503 35 17,605.00 303 38 11,514.00 Total Sales              1,009.00 36,021.00 Cost of Goods Sold 16,244.00 Gross Profit 19,777.00 Ans D FIFO , during inflation, produces more gross profit because , earlier purchases are issued to consumption first.

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