P6-2A Glee Distribution markets CDs of the performing artist Unique. At the begi
ID: 2606484 • Letter: P
Question
P6-2A Glee Distribution markets CDs of the performing artist Unique. At the beginning of October, Glee had in beginning inventory 2,000 of Unique's CDs with a unit cost of $7. During October, Glee made the following purchases of Unique's CDs. 3,000@ $10 4,000 @ $11 Oct. 3 Oct. 9 2,500 @ $8 3,500 @ $9 Oct. 19 Oct. 25 During October, 10,900 units were sold. Glee uses a periodic inventory system. Instructions (a) Determine the cost of goods available for sale. (b) Determine (1) the ending inventory and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost). Prove the accuracy of the cost of goods sold under the FIFO and LIFO methods. (c) Which cost flow method results in (1) the highest inventory amount for the balance sheet and (2) the highest cost of goods sold for the income statement?Explanation / Answer
1-
date
Units
unit price
total value = units*unit price
1-Oct
2000
7
14000
3-Oct
2500
8
20000
9-Oct
3500
9
31500
19-Oct
3000
10
30000
25-Oct
4000
11
44000
cost of goods available for sale
31-Oct
15000
139500
2-
FIFO method
cost of goods sold
1-Oct
2000
7
14000
3-Oct
2500
8
20000
9-Oct
3500
9
31500
19-Oct
2900
10
29000
cost of goods sold
10900
94500
cost of goods in inventory at month end = cost of goods available-cost of goods sold
139500-94500
45000
19-Oct
100
10
1000
25-Oct
4000
11
44000
cost of goods in inventory at year end
4100
45000
LIFO method
cost of goods sold
25-Oct
4000
11
44000
19-Oct
3000
10
30000
9-Oct
3500
9
31500
3-Oct
400
8
3200
cost of goods sold
10900
108700
cost of goods in inventory at year end
3-Oct
2100
8
16800
1-Oct
2000
7
14000
cost of goods in inventory at year end
4100
30800
weighted average method
weighted average cost of goods avaialble in month
total cost of goods available/no of units
139500/15000
9.3
cost of goods sold
10900*9.3
101370
cost of goods in inventory
4100*9.3
38130
3-
cost of highest inventory amount
45000
FIFO method
highest cost of goods sold
108700
LIFO METHOD
1-
date
Units
unit price
total value = units*unit price
1-Oct
2000
7
14000
3-Oct
2500
8
20000
9-Oct
3500
9
31500
19-Oct
3000
10
30000
25-Oct
4000
11
44000
cost of goods available for sale
31-Oct
15000
139500
2-
FIFO method
cost of goods sold
1-Oct
2000
7
14000
3-Oct
2500
8
20000
9-Oct
3500
9
31500
19-Oct
2900
10
29000
cost of goods sold
10900
94500
cost of goods in inventory at month end = cost of goods available-cost of goods sold
139500-94500
45000
19-Oct
100
10
1000
25-Oct
4000
11
44000
cost of goods in inventory at year end
4100
45000
LIFO method
cost of goods sold
25-Oct
4000
11
44000
19-Oct
3000
10
30000
9-Oct
3500
9
31500
3-Oct
400
8
3200
cost of goods sold
10900
108700
cost of goods in inventory at year end
3-Oct
2100
8
16800
1-Oct
2000
7
14000
cost of goods in inventory at year end
4100
30800
weighted average method
weighted average cost of goods avaialble in month
total cost of goods available/no of units
139500/15000
9.3
cost of goods sold
10900*9.3
101370
cost of goods in inventory
4100*9.3
38130
3-
cost of highest inventory amount
45000
FIFO method
highest cost of goods sold
108700
LIFO METHOD
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