The Quiqqley Company is started in Year One and buys 400 pieces of inventory for

Question

The Quiqqley Company is started in Year One and buys 400 pieces of inventory for $4 each on June 1. The company sells 300 of these units on September 1 for $20 each. The company buys another 400 units for $7 each on November 1 and finishes Year One with 500 units in stock. In Year Two, on February 1, the company sells 300 units for $20 each. On July 1, Year Two, the company buys 200 more units for $9 each. On August 1, Year Two, the company sells 100 units for $25 each. Finally, on December 1, Year Two, the company buys another 100 units for $10 each. a. Assume the company uses a perpetual FIFO system. What is the cost of goods sold figure to be reported for Year Two? b. Assume the company uses a perpetual LIFO system. What is the cost of goods sold figure to be reported for Year Two?

Explanation / Answer

a. Perpetual FIFO system

Cost of goods sold figure to be reported for Year Two = $2500

b. Perpetual LIFO system

Cost of goods sold figure to be reported for Year Two = $3000

Date Purchases Sales Balance Year 1 June 1 400 x $4 = $1600 Sep 1 300 x $4 = $1200 100 x $4 = 400 Nov 1 400 x $7 = $2800 100 x $4 = 400 400 x $7 = 2800 $2800 $1200 $3200 Year 2 Feb 1 100 x $4 = $400 200 x $7 = $1400 200 x $7 = $1400 Jul 1 200 x $9 = $1800 200 x $7 = $1400 200 x $9 = $1800 Aug 1 100 x $7 = $700 100 x $7 = $700 200 x $9 = $1800 Dec 1 100 x $10 = $1000 100 x $7 = $700 200 x $9 = $1800 100 x $10 = $1000 $2800 $2500 $3500

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