Question

Garrett Company has the following transactions during the months of April and May:

Date	Transaction	Units	Cost/Unit
April 1	Balance	300
17	Purchase	200	$5.10
25	Sale	150
28	Purchase	100	5.80
May 5	Purchase	250	5.10
18	Sale	300
22	Sale	50

The cost of the inventory on April 1 is $5, $4, and $2 per unit, respectively, under the FIFO, average, and LIFO cost flow assumptions.

Required:

1. Compute the inventories at the end of each month and the cost of goods sold for each month for the following alternatives:

1. FIFO periodic

   	Cost of Goods Sold	Ending Inventory
   April	$__________	$__________
   May	$__________	$__________

   1. FIFO perpetual

      	Cost of Goods Sold	Ending Inventory
      April	$__________	$__________
      May	$__________	$__________

   2. LIFO periodic

      	Cost of Goods Sold	Ending Inventory
      April	$__________	$__________
      May	$__________	$__________

2. LIFO perpetual (Round your intermediate calculations to the nearest cent.)

   	Cost of Goods Sold	Ending Inventory
   April	$__________	$__________
   May	$__________	$__________

3. Weighted average (Round unit costs to 4 decimal places and final answers to the nearest dollar.)

   	Cost of Goods Sold	Ending Inventory
   April	$__________	$__________
   May	$__________	$__________

4. Moving average (Round unit costs to 2 decimal places and final answers to nearest dollar.)

   	Cost of Goods Sold	Ending Inventory
   April	$__________	$__________
   May	$__________	$__________

2. Reconcile the difference between the LIFO periodic and the LIFO perpetual results. If an amount is zero, enter "0".

April	Cost of Goods Sold	Ending Inventory
Difference	$__________	$__________
May	Cost of Goods Sold	Ending Inventory
Difference	$__________	$__________

3. If Garrett uses IFRS, which of the previous alternatives would be acceptable, and why?

If Garrett Company uses IFRS, it may report its inventory under ________ . It may not use LIFO  under IFRS because it is not consistent with any presumed physical flow of inventory. Also, ________ is not allowed for tax purposes in most other countries, so there is no tax incentive for a company to use LIFO . Note that companies that use IFRS and have rising inventory costs will report a higher income because they include holding gains in income.

Answer 1

Periodic FIFO

Perpetual FIFO

Periodic LIFO

Perpetual LIFO

Periodic Avg

Perpetual Avg