nco ose Inventory information for Part #560 of MotorSnap Corp. discloses the fol

Question

nco ose Inventory information for Part #560 of MotorSnap Corp. discloses the following information for the month of June. 2. Units Cost Selling Price 300 200 800 500 500$ 300 10 June 1 Balance June 10 Sold June 11 Purchased June 15 Sold June 20 Purchased June 27Sold 24 12 25 13 $ 27 Required (a) - Assuming that the periodic inventory method is used, compute the cost of goods sold and ending inventory under [1] LIFO and [2] FIFO. each withdrawal, what is the value of ending inventory at LIFO? each withdrawal, what is the gross profit if the inventory is valued at FIFO? g that the perpetual inventory method is used and costs are computed at the time of (c) -Assuming that the perpetual inventory method is used and costs are computed at the time of (d) - Why is it stated that LIFO usually produces a lower gross profit than FIFO?

Explanation / Answer

STATEMENT SHOWING INVENTORY RECORD UNDER PERIODIC FIFO METHOD RECIEPTS COST OF GOODS SOLD BALANCE DATE UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ Bal.June1 300 10 3000 300 10 3000 Purchasse 11-Jun 800 12 9600 700 12 8400 100 12 1200 20-Jun 500 13 6500 500 13 6500 TOTAL 1600 19100 1000 11400 600 7700 STATEMENT SHOWING INVENTORY RECORD UNDER PERIODIC LIFO METHOD RECIEPTS COST OF GOODS SOLD BALANCE DATE UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ Bal.June1 300 10 3000 300 10 3000 Purchasse 11-Jun 800 12 9600 500 12 6000 300 12 3600 20-Jun 500 13 6500 500 13 6500 TOTAL 1600 19100 1000 12500 600 6600 COGS ENDING INV. FIFO 11400 7700 LIFO 12500 6600 STATEMENT SHOWING INVENTORY RECORD UNDER PERPETUAL LIFO METHOD RECIEPTS COST OF GOODS SOLD BALANCE DATE UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ 1-Jun 300 10 3000 10-Jun 200 10 2000 100 10 1000 11-Jun 800 12 9600 100 10 1000 800 12 9600 15-Jun 500 12 6000 100 10 1000 300 12 3600 20-Jun 500 13 6500 100 10 1000 300 12 3600 500 13 6500 27-Jun 300 13 3900 100 10 1000 300 12 3600 200 13 2600 TOTAL 1300 16100 1000 11900 600 7200 Ending Inventory is $ 7200 STATEMENT SHOWING INVENTORY RECORD UNDER PERPETUAL FIFO METHOD RECIEPTS COST OF GOODS SOLD BALANCE DATE UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ 1-Jun 300 10 3000 10-Jun 200 10 2000 100 10 1000 11-Jun 800 12 9600 100 10 1000 800 12 9600 15-Jun 100 10 1000 400 12 4800 400 12 4800 20-Jun 500 13 6500 400 12 4800 500 13 6500 27-Jun 300 12 3600 100 12 1200 500 13 6500 TOTAL 1300 16100 1000 11400 600 7700 Sales (200*24+500*25+300*27) 25400 Less: COGS 11400 GROSS PROFIT 14000 Req d: the Lifo Method produced lower Gross profits than FIFO because of rising prices of inventory and the inventory with recent cost is issue for sale.

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