Hi, could you please answer this but using the Perpetual Inventory System? Inven

Question

Hi, could you please answer this but using the Perpetual Inventory System?

Inventory Costing Methods–Periodic System Oxendine Company's inventory records for the month of November reveal the following: Inventory, November 1 November 4, purchase November 7, sale November 13, purchase November 18, purchase November 22, sale November 24, purchase November 28, sale 200 units @ $18.00 250 units @ $18.50 300 units @ $42.00 220 units @ $18.90 150 units @ $19.00 380 units @ $42.50 200 units @ $19.20 110 units @ $43.00 Selling and administrative expenses for the month were $10,800. Depreciation expense was $4,000. Oxendine's tax rate is 35%. Required 1. Calculate the cost of goods sold and ending inventory under each of the following three methods assuming a periodic inventory system: (a) FIFO, (b) LIFO, and (c) weighted average. 2. Calculate the gross profit and net income under each costing assumption. 3. Under which costing method will Oxendine pay the least taxes? Explain your answer. 4. Assume that Oxendine prepares its financial statements in accordance with IFRS. Which costing method should the company use to pay the least amount of taxes? Explain your answer.

Explanation / Answer

1 (a) FIFO Under FIFO Goods purchased first are sold first Cost of goods sold: Sales Nov.7 200 units @ $18 3600 100 units @ $18.50 1850 300 units sold Nov.22 150 units @ $18.50 2775 220 units @ $18.90 4158 10 units @ $19 190 380 units sold Nov.28 110 units @ $19 2090 110 units sold Cost of goods sold 14663 Cost of ending inventory: From Nov.18 purchase 30 units @ $19 570 From Nov.24 purchase 200 units @ $19.20 3840 Cost of ending inventory 230 units 4410 (b) LIFO Under LIFO, Goods purchased last are sold first Cost of goods sold: Nov.7 250 units @ $18.50 4625 50 units @ $18 900 300 units sold Nov.22 10 units @ $18 180 220 units @ $18.90 4158 150 units @ $19 2850 380 units sold Nov.28 110 units @ $19.20 2112 110 units sold Cost of goods sold 14825 Cost of ending inventory: From Nov.1 inventory 140 units @ $18 2520 From Nov.24 purchase 90 units @ $19.20 1728 Cost of ending inventory 230 units 4248 © Weighted average Units Price Total Cost Nov.1 inventory 200 18 3600 Purchases, Nov.4 250 18.5 4625 Nov.13 220 18.9 4158 Nov.18 150 19 2850 Nov.24 200 19.2 3840 1020 19073 Weighted average cost per unit=19073/1020=$18.70 per unit Cost of goods sold=Number of units sold*Weighted average cost per unit=790*18.70=$14773 Cost of ending inventroy=Number of units in ending inventory*Weighted average cost per unit=230*18.70=$4301 2 Gross profit and Net income, FIFO: Sales FIFO LIFO Weighted Average (300*42) 12600 (380*42.50) 16150 (110*43) 4730 33480 33480 33480 Less:Cost of goods sold 14663 14825 14773 Gross profit 18817 18655 18707 Less: Selling and administrative 10800 Depreciation expense 4000 14800 14800 14800 Income before taxes 4017 3855 3907 Less: Tax @ 35% 1406 1349 1367 Net income 2611 2506 2540 3 Under LIFO method, Least tax is paid this is because of higher cost of goods sold 4 As per IFRS,LIFO is not allowed Hence,Use weighted average method to pay least amount of taxes

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