Exercise 192 Irish Company uses the periodic inventory method and had the follow

Question

Exercise 192 Irish Company uses the periodic inventory method and had the following inventory information available: Units Unit Cost Total Cost 1/20 Purchase 7/25 Purchase 10/20 Purchase Beginning Inventory 100 400 200 300 1,000 $500 2,400 1,400 2,400 $6,700 A physical count of inventory on December 31 revealed that there were 480 units on hand Answer the following independent questions. Assume that the company uses the FIFO method. The value of the ending inventory at December 31 is 2.Assume that the company uses the Average-Cost method. The value of the ending inventory 3. Assume that the company uses the LIFO method. The value of the ending inventory on 4. (a) Determine the difference in the amount of income that the company would have reported if it on December 31 is December 31 is had used the FIFO method instead of the LIFO method. 4 Would income have been greater or less?

Explanation / Answer

1) FIFO method ending inventory = (300*8+180*7) = 3660

2) Average method ending inventory = 6700/1000*480 = 3216

3) LIFO method ending inventory = (100*5+380*6) = 2780

4) Difference in the amount of income that the company would report if it had used the FIFO method instead of LIFO method = (3660-2780) = 880

5) FIFO income is greater and LIFO income is less

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