ThreeBrothers uses a periodic inventory system for its normal operations. Upper

Question

ThreeBrothers uses a periodic inventory system for its normal operations. Upper management is contemplating a change in the method used to report the cost of goods sold. They will choose the method (either FIFO or DVLIFO) that maximizes cash flow to shareholders. The general ledger has historically been kept on a FIFO basis. A physical inventory count indicated 44,000 units on hand at the end of 2015. PURCHASES FOR 2015(normal operations) Beginning units: 5,000@ $500 each Purchases: Apr-May 40,000 units @ $500 each Jun-Jul35,000 units @ $505 each Aug-Sept 48,500 units @ $515 each Oct Nov-Dec 20 ,000 units (a $535 each 24,000 units @ S520 each

Explanation / Answer

Answer : Closing Value is $24,520,000

Working notes for the above answer is as under

Inventory Valuation as per LIFo Opeaning Bal Purchase Sales Ending Date Unit Price Total Unit Price Total Unit Price Total Unit Price Total Opeaning 5000 500 2500000 Purchase April-may 40000 500 20000000 Jun-July 35000 505 17675000 Aug-sep 48500 515 24977500 Oct 24000 520 12480000 Nov 20000 535 10700000 20000 535 10700000 24000 520 12480000 48500 515 24977500 31000 505 15655000 5000 500 2500000 40000 500 20000000 4000 505 2020000 5000 2500000 167500 85832500 123500 63812500 49000 24520000

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