Date Voucher Terms Units Received Unit Invoice Cost Gross Invoice Amount Waterwa

Question

Date

Voucher

Terms

Units
Received

Unit Invoice
Cost

Gross Invoice
Amount

Waterway Football Shop began operations on January 2, 2017. The following stock record card for footballs was taken from the records at the end of the year.

Date

Voucher

Terms

Units
Received

Unit Invoice
Cost

Gross Invoice
Amount

1/15 10624 Net 30 69 $29 $2,001 3/15 11437 1/5, net 30 84 23 1,932 6/20 21332 1/10, net 30 109 22 2,398 9/12 27644 1/10, net 30 103 18 1,854 11/24 31269 1/10, net 30 95 16 1,520 Totals 460 $9,705
A physical inventory on December 31, 2017, reveals that 113 footballs were in stock. The bookkeeper informs you that all the discounts were taken. Assume that Waterway Football Shop uses the invoice price less discount for recording purchases.

Explanation / Answer

1). Under FIFO (After 1% discount) :- Ending Balance of football = 113

Ending Inventory = (95*$16*0.99) + ((113-95)*$18*0.99)

= (95*$15.84) + (18*$17.82)

= $1504.8 + $320.76

= $1825.56

2). Cost of Goods Sold under LIFO method (After 1% discount) :- *(113-69 = 44)

= (95*$16*0.99) + (103*$18*0.99) + (109*$22*0.99) + ((84-44*)*$23*0.99)

= (95*$15.84) + (103*$17.82) + (109*$21.78) + (40*22.77)

= $1504.8 + $1835.46 + $2374.02 + $910.8

= $6625.08

Ending Inventory under LIFO :-

= (69*$29) + ((113-69)*$23*0.99)

= $2001 + (44*$22.77)

= $2001 + $1001.88

= $3002.88

3). Method recommend to the owner to minimize income taxes in 2017 = LIFO

Because Ending Inventory of LIFO is greater than Ending inventory of FIFO.

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