Mojo Industries tracks the number of units purchased and sold throughout each ac

Question

Mojo Industries tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the accounting period, January 31, 2012. The inventorys selling price is $10 per unit.

Assuming that for Specific identification method (item 1d) the January 10 sale was from the beginning inventory and the January 17 sale was from the January 12 purchase.

Compute the amount of goods available for sale, ending inventory, and cost of goods sold at January 31, 2012, under each of the following inventory costing methods: (Round your intermediate calculations to 2 decimal places and the final answers to the nearest dollar value.)

Of the four methods, which will result in the highest gross profit?

Of the four methods, which will result in the lowest income taxes?

Mojo Industries tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the accounting period, January 31, 2012. The inventorys selling price is $10 per unit.

Explanation / Answer

STATEMENT SHOWING INVENTORY RECORD UNDER PERPETUAL FIFO METHOD RECIEPTS COST OF GOODS SOLD BALANCE DATE UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ 1-Jan 190 3 570 10-Jan 160 3 480 30 3 90 12-Jan 240 3.5 840 30 3 90 240 3.5 840 17-Jan 30 3 90 110 3.5 385 130 3.5 455 26-Jan 70 4.5 315 130 3.5 455 70 4.5 315 TOTAL 310 1155 300 955 200 770 STATEMENT SHOWING INVENTORY RECORD UNDER PERPETUAL LIFO METHOD RECIEPTS COST OF GOODS SOLD BALANCE DATE UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ 1-Jan 190 3 570 10-Jan 160 3 480 30 3 90 12-Jan 240 3.5 840 30 3 90 240 3.5 840 17-Jan 140 3.5 490 30 3 90 100 3.5 350 26-Jan 70 4.5 315 30 3 90 100 3.5 350 70 4.5 315 TOTAL 310 1155 300 970 200 755 STATEMENT SHOWING INVENTORY RECORD UNDER PERPETUAL WEIGHTED AVERAGE METHOD RECIEPTS COST OF GOODS SOLD BALANCE DATE UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ 1-Jan 190 3 570 10-Jan 160 3 480 30 3 90 12-Jan 240 3.5 840 30 3 90 240 3.5 840 Average 270 3.45 930 17-Jan 140 3.45 483 130 3.45 447 26-Jan 70 4.5 315 130 3.45 447 70 4.5 315 Average 200 3.81 762 TOTAL 310 1155 300 963 200 3.81 762 STATEMENT SHOWING INVENTORY RECORD UNDER SPECIFIC DENTIFICATION METHOD RECIEPTS COST OF GOODS SOLD BALANCE DATE UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ Bal. Jan 1 190 3 570 160 3 480 30 3 90 Purchasse 12-Jan 240 3.5 840 140 3.5 490 100 3.5 350 17-Jan 70 4.5 315 70 4.5 315 TOTAL 500 1725 300 970 200 755 Cost of Goods available: Inventory ( 190 units @3) 570 Purchase-Jan12 (240 units @3.5) 840 Purchase Jan17 (70 units @4.5) 315 Cost of Goods available: 1725 Ending Inventory COGS FIFO 770 955 LIFO 755 970 Average 762 963 Specific Identification 755 970 Req 2-a: FIFO method gives the highest Gross profit. Req 2-b: LIFO method gives the lowest income tax.

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