Question

You have the following information for Sunland Company. Sunland uses the periodic method of accounting for its inventory transactions. Sunland only carries one brand and size of diamonds—all are identical. Each batch of diamonds purchased is carefully coded and marked with its purchase cost.

March 1		Beginning inventory 150 diamonds at a cost of $300 per diamond.
March 3		Purchased 200 diamonds at a cost of $340 each.
March 5		Sold 170 diamonds for $630 each.
March 10		Purchased 345 diamonds at a cost of $365 each.
March 25		Sold 385 diamonds for $680 each.

Assume that Sunland uses the FIFO cost flow assumption. Calculate cost of goods sold. How much gross profit would the company report under this cost flow assumption?

Cost of goods sold ?

Gross profit ?

Assume that Sunland uses the LIFO cost flow assumption. Calculate cost of goods sold. How much gross profit would the company report under this cost flow assumption?

Cost of goods sold ?

Gross profit ?

Answer 1

STATEMENT SHOWING INVENTORY RECORD UNDER PERIODIC FIFO METHOD
	RECIEPTS	COST OF GOODS SOLD	BALANCE
DATE	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $
01-Mar	150	300	45000	150	300	45000
Purchasse
03-Mar	200	340	68000	200	340	68000
10-Mar	345	365	125925	205	365	74825	140	365	51100
TOTAL	695		238925	555		187825	140		51100
STATEMENT SHOWING INVENTORY RECORD UNDER PERIODIC LIFO METHOD
	RECIEPTS	COST OF GOODS SOLD	BALANCE
DATE	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $
01-Mar	150	300	45000	10	300	3000	140	300	42000
Purchasse
03-Mar	200	340	68000	200	340	68000
10-Mar	345	365	125925	345	365	125925
TOTAL	695		238925	555		196925	140		42000
Req 1.
Cost of goods sold as per FIFO:		187825
Gross Profit as per FIFO:
Sales revenue (170*630+385*680)	368900
Less: Cost of good ssold		1,87,825
Gross Profit as per FIFO:		1,81,075
Req2.
Cost of goods sold as per LIFO:		196925
Gross Profit as per LIFO:
Sales revenue (170*630+385*680)	368900
Less: Cost of good ssold		1,96,925
Gross Profit as per LIFO:		1,71,975