Question
In: Accounting
Eight Company reported 1,500 units of inventory at a total cost of $15,000 as of November...
Eight Company reported 1,500 units of inventory at a total cost of $15,000 as of November 1, 2018. The following transactions occurred during the month.
November 14: The company purchased 2,000 units of merchandise on account for $22,000 with terms 2/10, n30. The goods were shipped f.o.b. destination and arrived at the company's warehouse on November 18. The company paid $500 cash to a third party carrier for freight.
November 18: The company received the inventory purchased on November 14.
November 19: The company returned 300 units of merchandise purchased on November 14 for credit.
November 20: The company sold 1,400 units of merchandise on account for $28,000 with terms 2/10, n30. The goods shipped f.o.b. shipping point and arrived at the customer's warehouse on November 24.
November 22: The company paid for the merchandise purchased on November 14.
November 24: The customer confirmed receipt of the merchandise shipped on November 20.
Assume that Eight Company uses the periodic method and last-in, first-out (LIFO) cost flow assumption to account for inventory, the gross method to account for purchase discounts, and the gross method to account for sales discounts.
What is the balance of inventory as of November 30, 2018?
Solutions
Expert Solution
Given details in tablular form:
| Units | Cost per unit | Amount | |
| Beginning Inventory (Nov 1) | 1,500 | $10 | $15,000 |
| November 14 Purchase | 2,000 | $11.25 | $22,500 ($22,000 + $500) |
| November 19 Purchase returns | (300) | $11.25 | ($3,375) (300 units x $11.25) |
| Total Inventory | 3,200 | $34,125 | |
| Units | Sales price | Sales amount | |
| November 20 sales | 1,400 | $20 | $28,000 |
| Total sales | 1,400 | $28,000 |
LIFO Method
Under the LIFO Method, cost of goods sold is calculated using the most recent inventory first and then working our way backwards until the sales order has been filled.
Calculation of ending invetntory on Nov 30, 2018:
| Units | Cost | Amount | |
| Sales from: | |||
| Novemeber 14 purchases | 1,400 | $11.25 | $15,750 |
| Cost of goods sold | 1,400 | $15,750 | |
| Remaining Inventory in: | |||
| Beginning Inventory (Nov 1) | 1,500 | $10 | $15,000 |
| November14 Purchases | 300 (2000 - 300 - 1,400)) | 11.25 | $3,375 |
| Ending Inventoy (Nov 30) | 1,800 | $18,375 | |
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