Question

Transactions for a company during January 2016 include the following:

Date	Event	Transactions
1-Jan	Beginning Inventory	8 Snowmobiles at $2,000 each
5-Jan	Purchases+Freight	5 Snowmobiles at $2,500 each
13-Jan	Sold	9 Snowmobiles at $3,000 each
18-Jan	Sold	3 Snowmobiles at $3,000 each
23-Jan	Purchases+Freight	7 Snowmobiles at $2,600 each
25-Jan	Sold	3 Snowmobiles at $3,200 each

Prepare the income statements to Gross Profit - using FIFO, LIFO, and Average Cost Methods

	FIFO	LIFO	Average Cost
Sales
Beginning Inventory
Cost of Goods Purchased
Cost of Goods Available for Sale
(Ending Inventory)
Cost of Goods Sold
Gross Profit

Answer 1

Prepare the income statements to Gross Profit - using FIFO, LIFO, and Average Cost Methods
	FIFO	LIFO	Average Method
Sales	$45,600	$45,600	$45,600
Beginning Inventory	$16,000	$16,000	$16,000
Cost of goods Purchased	$30,700	$30,700	$30,700
Cost of goods available for sale	$46,700	$46,700	$46,700
(Ending Inventory)	-$13,000	-$12,400	-$12,745
Cost of goods sold	$33,700	$34,300	$33,955
Gross Profit (Sales - COGS)	$11,900	$11,300	$11,645
Units in ending inventory = 8+5+7 - 9 -3 -3 = 5 units
Under FIFO , units in ending inventory will be from latest purchases.Hence Ending inventory value = 5 units * $2600 = $13,000
Under LIFO , units in ending inventory will be from oldest purchases.Hence Ending inventory value = (1 unit * $2000) + (4 units * $2600) = $12,400
Under Average method , value of ending inventory = 5 units * $2549.04 = $12745