ABC Company purchases five products for sale in the order and at the costs shown
ID: 2743839 • Letter: A
Question
ABC Company purchases five products for sale in the order and at the costs shown:
Unit Cost per Unit
1 $10
2 $12
3 $15
4 $18
5 $13
1.Assume ABC sells two items and uses the FIFO method of inventory valuation. What amount would appear in ending inventory on the balance sheet?
a. $22
b. $46
c. $45
d. $31
2. Assume ABC sells two items and uses the LIFO method of inventory valuation. What amount would appear for cost of goods sold on the income statement?
a. $37
b. $41
c. $22
d. $31
3. Assume ABC uses the average cost method of inventory valuation. What unit cost would be used to determine the amount in ending inventory or cost of goods sold?
a. $12.67
b. $13.60
c. $15.00
d. $13.00
Explanation / Answer
1.
Company sell two Item using FIFO method so ending value of inventory is calculated below:
Ending value of inventory = $15 + $18 + $13
= $46
Ending value of inventory using FIFO method is $46.
Again
2.
Company sell two Item using LIFO method so ending value of inventory is calculated below:
Ending value of inventory = $10 + $12 + $15
= $37
Ending value of inventory using LIFO method is $37.
3.
ABC uses the average cost method of inventory valuation then unit cost company uses for inventory is calculated below:
Unit cost of inventory = ($10 + $12 + $15 + $18 + $13) / 5
= $68 / 5
= 13.6
If ABC uses the average cost method of inventory valuation then unit cost company uses for inventory is $13.6.
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