Question

Flint Company uses the periodic inventory method and had the following inventory information available:

				Units		Unit Cost			Total Cost
1/1		Beginning Inventory		92		$4			$368
1/20		Purchase		460		$5			2,300
7/25		Purchase		92		$7			644
10/20		Purchase		276		$8			2,208
		Total		920					$5,520

A physical count of inventory on December 31 revealed that there were 322 units on hand.

Answer the following independent questions. (Round average cost per unit to 2 decimal places, e.g. 5.25 and final answers to 0 decimal places, e.g. 2,520.)

1.		Assume that the company uses the FIFO method. The value of the ending inventory at December 31 is		$
2.		Assume that the company uses the average cost method. The value of the ending inventory on December 31 is		$
3.		Assume that the company uses the LIFO method. The value of the ending inventory on December 31 is		$
4.		Determine the difference in the amount of income that the company would have reported if it had used the FIFO method instead of the LIFO method		$

Answer 1

• Requirement 1

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	92	$                   4.00	$                            368.00	92	$                 4.00	$                     368.00	0	$                   4.00	$                         -
Purchases:
20-Jan	460	$                   5.00	$                        2,300.00	460	$                 5.00	$                 2,300.00	0	$                   5.00	$                         -
25-Jul	92	$                   7.00	$                            644.00	46	$                 7.00	$                     322.00	46	$                   7.00	$                322.00
20-Oct	276	$                   8.00	$                        2,208.00	0	$                 8.00	$                              -	276	$                   8.00	$            2,208.00
TOTAL	920		$                        5,520.00	598		$                 2,990.00	322		$            2,530.00

Value of ending inventory = $ 2530

• [2]

Average Method	Cost of Goods available for sale
	Units	Cost/unit	COG for sale
Beginning Inventory	92	$                   4.00	$                            368.00
Purchases:
20-Jan	460	$                   5.00	$                        2,300.00
25-Jul	92	$                   7.00	$                            644.00
20-Oct	276	$                   8.00	$                        2,208.00
TOTAL	920	$              6.0000	$                        5,520.00

Value of ending inventory = 322 units x $ 6 = $ 1932

• [3]

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	92	$                  4.00	$                            368.00	0	$                 4.00	$                              -	92	$                   4.00	$                368.00
Purchases:
20-Jan	460	$                   5.00	$                        2,300.00	230	$                 5.00	$                 1,150.00	230	$                   5.00	$            1,150.00
25-Jul	92	$                   7.00	$                            644.00	92	$                 7.00	$                     644.00	0	$                   7.00	$                         -
20-Oct	276	$                   8.00	$                        2,208.00	276	$                 8.00	$                 2,208.00	0	$                   8.00	$                         -
TOTAL	920		$                        5,520.00	598		$                 4,002.00	322		$            1,518.00

Value of ending inventory = $ 1518

• Difference in amount of income =Difference in amount of cost of goods
  = $4002 – 2990
  = $ 1012