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Peoples Printer Co. sells printers and uses a perpetual inventory approach. The PX4015 Brand is one...

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

Solutions

Expert Solution

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

ekkarill92 answered 1 year ago
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