Question

Inventory

Kobe Inc. has purchased the following inventory items during the month of April.

April 1            5,000 units @ $5 each

April 10          10,000 units @ $10 each

April 16          10,000 units @ $20 each

April 28          5,000 units @ 15 each

Beginning inventory for Kobe Inc. @ March 31, 2018 as 10,000 @ $1 each.

Kobe Inc. sold 10,000 units for $30 on April 8 and 20,000 units for $40 on April 30.

What would be the Cost of Goods Sold and Ending Inventory for FIFO; LIFO, AVERAGE methods if Kobe Inc. follows the periodic timing procedure?

What is the gross margin if Kobe Inc. adopted the perpetual LIFO accounting method?

Answer 1

• All working forms part of the answer
• Working for Cost of Goods and Ending Inventory – Periodic Methods

FIFO	Cost of Goods available for sale			Cost of Goods Sold			Ending Inventory
	Units	Cost/unit	COG for sale	Units sold	Cost/unit	COGS	Units	Cost/unit	Ending inventory
Beginning Inventory	10000	$                   1.00	$                      10,000.00	10000	$           1.00	$        10,000.00	0	$           1.00	$                         -
Purchases:
01-Apr	5000	$                   5.00	$                      25,000.00	5000	$           5.00	$        25,000.00	0	$           5.00	$                         -
10-Apr	10000	$                10.00	$                    100,000.00	10000	$         10.00	$      100,000.00	0	$        10.00	$                         -
16-Apr	10000	$                20.00	$                    200,000.00	5000	$         20.00	$      100,000.00	5000	$        20.00	$        100,000.00
28-Apr	5000	$                15.00	$                      75,000.00	0	$         15.00	$                        -	5000	$        15.00	$          75,000.00
TOTAL	40000		$                    410,000.00	30000		$      235,000.00	10000		$        175,000.00

LIFO	Cost of Goods available for sale			Cost of Goods Sold			Ending Inventory
	Units	Cost/unit	COG for sale	Units sold	Cost/unit	COGS	Units	Cost/unit	Ending inventory
Beginning Inventory	10000	$                   1.00	$                      10,000.00	0	$           1.00	$                        -	10000	$           1.00	$          10,000.00
Purchases:	0	$                       -	$                                     -
01-Apr	5000	$                   5.00	$                      25,000.00	5000	$           5.00	$        25,000.00	0	$           5.00	$                         -
10-Apr	10000	$                10.00	$                    100,000.00	10000	$         10.00	$      100,000.00	0	$        10.00	$                         -
16-Apr	10000	$                20.00	$                    200,000.00	10000	$         20.00	$      200,000.00	0	$        20.00	$                         -
28-Apr	5000	$                15.00	$                      75,000.00	5000	$         15.00	$        75,000.00	0	$        15.00	$                         -
TOTAL	40000		$                    410,000.00	30000		$      400,000.00	10000		$          10,000.00

Weighted Average (Periodic)	Units	Cost per unit	Total
Beginning Inventory	10000	$       1.00	$     10,000.00
Purchases:
01-Apr	5000	$       5.00	$     25,000.00
10-Apr	10000	$    10.00	$   100,000.00
16-Apr	10000	$    20.00	$   200,000.00
28-Apr	5000	$    15.00	$     75,000.00
Total Purchases	30000		$   400,000.00
Goods Available for Sales	40000		$   410,000.00
Weighted Average cost per unit		$    10.25
Cost of Goods Sold	30000	$    10.25	$   307,500.00
Ending Inventory	10000	$    10.25	$   102,500.00

• Answers: Cost of Goods Sold and Ending Inventory:

	Cost of Goods Sold	Ending Inventory
FIFO	$        235,000.00	$        175,000.00
LIFO	$        400,000.00	$          10,000.00
Average Cost	$        307,500.00	$        102,500.00

• Requirement 2: Gross Margin: LIFO Perpetual

Cost of ending Inventory of 10,000 units at LIFO Perpetual =

5000 units at $ 1 {Beginning rates] = $ 5,000

5000 units at $ 10 [April 10 Purchase] = $ 50,000

Cost of Ending inventory = $ 55,000

Cost of Goods Sold = Cost of Goods available for sale – Ending inventory

=$ 410,000 – $ 55,000

= $ 355,000

GROSS MARGIN calculated as:

Sales	Units	Rate	Amount
Apr-08	10000	$          30.00	$     300,000.00
Apr-30	20000	$          40.00	$     800,000.00
Total	30000		$ 1,100,000.00
Less: Cost of Goods Sold	30000		$     355,000.00
Gross Profit			$     745,000.00 = ANSWER