Question

Peoples Printer Co. sells printers and uses a perpetual inventory approach. The PX4015 Brand is one of the printers it sells and this brand had the following beginning inventory, purchase, and sales history for the current year:

     Number of          Cost per             Total

                                                    Printers              Printer              Cost

January 1 inventory                          9                  $146.00          $1,314.00

July 16 purchases                                   14                 $151.00         $2,114.00

December 9 purchases                            5               $158.00           $790.00

Available for sale                                   28                                      $4,218.00

July 20 sales                                              19    

December 31 inventory                           9

The selling price of the printer was $200.

What is the cost of goods sold for the year ended December 31 if the LIFO cost flow assumption is used?

	a.	$2,824
	b.	$2,844
	c.	$1,374
	d.	$2,904

What is the ending inventory as of December 31 if the LIFO cost flow assumption is used?

	a.	$1,394
	b.	$1,314
	c.	$1,374
	d.	$2,844

What is the gross profit for the year ended December 31 if the LIFO cost flow assumption is used?  

	a.	$896
	b.	$956
	c.	$976
	d.	$944

What is the cost of goods sold for the year ended December 31 if the FIFO cost flow assumption is used?

	a.	$2,904
	b.	$2,844
	c.	$1,394
	d.	$2,824

What is the ending inventory as of December 31 if the FIFO cost flow assumption is used?

	a.	$1,394
	b.	$1,314
	c.	$1,374
	d.	$2,824

What is the gross profit for the year ended December 31 if the FIFO cost flow assumption is used?   

	a.	$976
	b.	$896
	c.	$956
	d.	$944

Answer 1

Solution :-

Date	Number of Printers	Cost ($)
January 1 (Inventory)	9	$ 146
July 16 (Purchases)	14	$ 151
Total	23
July 20 (Sales)	(19)
Balance Stock	4
December 9(Purchases)	5	$ 158
December 31 (Ending Inventory)	9

Under LIFO Method , the goods which are purchased recently are sold first . For example : 19 printers are sold on july 20 , which means under LIFO system 14 printers recently purchased on July 16 are sold first along with 5 printers of opening Inventory. Therefore, Ending Inventory Includes 5 printers puchased on December 9 and 4 printers of Opening inventory.

1. Under LIFO System, cost of goods sold for the year ended December 31 :-

Date	Number of Printers	Cost per Printer	Total Cost
July 16	14	$ 151	$ 2114
Jan 1	5	$ 146	$ 730
Total	19		$ 2844

Ans : b. $ 2844

2. Under LIFO System, ending inventory as of December 31 :-

Date	Number of Printers	Cost per Printer	Total Cost
Dec 9	5	$ 158	$ 790
Jan 1	4	$ 146	$ 584
Total	9		$ 1374

Ans : c. $ 1374

3. Under LIFO System, gross profit for the year ended December 31 :-

Total Sales ( 19 Printers * $ 200)	$ 3800
Less : Cost of Goods sold (From part 1)	($ 2844)
Gross Profit	$ 956

Ans : b. $ 956

Under FIFO Method , the opening inventory of goods are sold first , thereafter the goods purchased first are sold first . For example : 19 printers are sold on july 20 , which means under FIFO system , first of all 9 printers of opening inventory are sold along with 10 printers purchased on July 16 are sold. Therefore, Ending Inventory Includes 5 printers puchased on December 9 and remaining 4 printers purchased on july 16.

4. Under FIFO System, cost of goods sold for the year ended December 31 :-

Date	Number of Printers	Cost per Printer	Total Cost
Jan 1	9	$ 146	$ 1314
July 16	10	$ 151	$ 1510
Total	19		$ 2824

Ans : d. $ 2824

5. Under FIFO System, ending inventory as of December 31 :-

Date	Number of Printers	Cost per Printer	Total Cost
July 16	4	$ 151	$ 604
Dec 9	5	$ 158	$ 790
Total	9		$ 1394

Ans : a. $ 1394

6. Under FIFO System, gross profit for the year ended December 31 :-

Total Sales ( 19 Printers * $ 200)	$ 3800
Less : Cost of Goods sold (From part 4)	($ 2824)
Gross Profit	$ 976

Ans : a. $ 976