Question

– Problem –

Robinson Co. is a specialty retailer that operates in several locations in western North Carolina. Robinson sells snowboards and related items. Data related to purchases and sales of one of its top selling snowboard models for the years 2017 and 2018 are shown below:

Date	Description	Units	Cost Per Unit
01/01/17	Inventory	36	$397
01/25/17	Purchase	21	$409
10/06/17	Purchase	44	$416
11/01/17	Purchase	35	$428
11/22/17	Purchase	26	$441
2017	Sales	103	–
01/29/18	Purchase	18	$454
10/04/18	Purchase	37	$469
11/07/18	Purchase	24	$486
12/10/18	Purchase	13	$502
2018	Sales	119	–

Robinson uses a periodic inventory system to account for its inventory transactions. The company prepares financial statements just once a year, at its December 31 year-end. None of the company’s inventory was stolen or damaged during these two years.

– Instructions –

Address the following matters related to Robinson Co.’s accounting for, and reporting of, its inventory activities during 2017 and 2018:

Compute the company’s inventory at December 31, 2017 andits cost of goods sold for 2017 under each of the following cost flow methods:

▪     FIFO method

▪     LIFO method

▪     Average cost method (round the average cost per unit to the nearest cent)

Compute the company’s inventory at December 31, 2018 andits cost of goods sold for 2018 under each of the following cost flow methods:

▪     FIFO method

▪     LIFO method

▪     Average cost method (round the average cost per unit to the nearest cent)

Assume Robinson uses a perpetual system and the FIFO method for day-to-day bookkeeping purposes, and the company converts its accounts to the LIFO method (periodic system) for financial reporting. Give the adjusting entry Robinson must make at December 31, 2017 to convert its accounts to LIFO. Ignore income taxes.

As in (c), assume Robinson keeps its accounts on a FIFO basis and converts them at year-end to the LIFO method. Give the adjusting entry needed at December 31, 2018 to convert the company’s accounts to LIFO. Ignore income taxes. (Note– Robinson follows the practice of making reversing entries to reverse the effects of certain prior-year adjusting entries. Proceed as if Robinson recorded an entry on January 1, 2018 to reverse the effects of the December 31, 2017 LIFO conversion entry. You do notneed to make this reversing entry; simply note that it has been made.)

Please observe the following checklistof instructions as you complete this assignment:

□          Prepare your journal entries and supporting calculations using an electronic spreadsheet.

Answer 1

FIFO Method 31 dec2017
Date	Goods Purchase( Units @ Cost)	Cost Of goods sold ( Units @ Cost)	Inventory ( Units @ Cost)	Balance ($)
1-Jan			36 @ $397	$14,292
25-Jan	21 @ $409 = $8589		36 @ $397+21 @ $409	$22,881
6-Oct	44 @ $416 = $18304		36 @ $397+21 @ $409+44 @ $416	$41,185
1-Nov	35 @ $428 = $14980		36 @ $397+21 @ $409+44 @ $416+35 @ $428	$56,165
22-Nov	26 @ $441 = $11466		36 @ $397+21 @ $409+44 @ $416+35 @ $428+26 @ $441	$67,631
2017		(103 Units) 36 @ $397+ 21 @ $409+ 44 @ $416+ 2 @ $428= $42041	33 @ $428+26 @ $441	$25,590

LIFO Method 31 Dec2017
Date	Goods Purchase( Units @ Cost)	Cost Of goods sold ( Units @ Cost)	Inventory ( Units @ Cost)	Balance ($)
1-Jan			36 @ $397	$14,292
25-Jan	21 @ $409 = $8589		36 @ $397+21 @ $409	$22,881
6-Oct	44 @ $416 = $18304		36 @ $397+21 @ $409+44 @ $416	$41,185
1-Nov	35 @ $428 = $14980		36 @ $397+21 @ $409+44 @ $416+35 @ $428	$56,165
22-Nov	26 @ $441 = $11466		36 @ $397+21 @ $409+44 @ $416+35 @ $428+26 @ $441	$67,631
2017		(103 Units) 26 @ $441+35 @ $428+42 @ $416= $43918	36 @ $397+21 @ $409+ 2 @ $416	$23,713

Wighted Average 31 dec 2017
Date	Goods Purchase( Units @ Cost)	Cost Of goods sold ( Units @ Cost)	Inventory ( Units @ Cost)	Balance ($)
1-Jan			36 @ $397	$14,292
25-Jan	21 @ $409 = $8589		36 @ $397+21 @ $409	$22,881
6-Oct	44 @ $416 = $18304		36 @ $397+21 @ $409+44 @ $416	$41,185
1-Nov	35 @ $428 = $14980		36 @ $397+21 @ $409+44 @ $416+35 @ $428	$56,165
22-Nov	26 @ $441 = $11466		36 @ $397+21 @ $409+44 @ $416+35 @ $428+26 @ $441 (Average $417)	$67,631
10-Sep		103 @ $417=$43000	59 @ $417	$24,603

Date	Particulars	Debit($)	Credit($)
Dec 31,2017	Cost of Goods Sold	$1877
	LIFO Reserve		$1877
	year ending Adjust FIFO to LIFO(25590-23713)

FIFO Method 31 Dec 2018
Date	Goods Purchase( Units @ Cost)	Cost Of goods sold ( Units @ Cost)	Inventory ( Units @ Cost)	Balance ($)
1-Jan			33 @ $428+26 @ $441	$25,590
29-Jan	18 @ $454=$8172		33 @ $428+26 @ $441+18 @ $454	$33,762
4-Oct	37 @ $469 = $17353		33 @ $428+26 @ $441+18 @ $454+37 @ $469	$51,115
7-Nov	24 @ $486 = $11664		33 @ $428+26 @ $441+18 @ $454+37 @ $469+24 @ $486	$62,779
10-Dec	13 @ $502 = $6526		33 @ $428+26 @ $441+18 @ $454+37 @ $469+24 @ $486+13 @ $502	$69,305
2018		(119 Units) 33 @ $428+26 @ $441+18 @ $454+37 @ $469+5 @ $486= $53545	19 @ $486+13 @ $502	$15,760

LIFO Method 31 Dec 2018
Date	Goods Purchase( Units @ Cost)	Cost Of goods sold ( Units @ Cost)	Inventory ( Units @ Cost)	Balance ($)
1-Jan			33 @ $428+26 @ $441	$25,590
29-Jan	18 @ $454=$8172		33 @ $428+26 @ $441+18 @ $454	$33,762
4-Oct	37 @ $469 = $17353		33 @ $428+26 @ $441+18 @ $454+37 @ $469	$51,115
7-Nov	24 @ $486 = $11664		33 @ $428+26 @ $441+18 @ $454+37 @ $469+24 @ $486	$62,779
10-Dec	13 @ $502 = $6526		33 @ $428+26 @ $441+18 @ $454+37 @ $469+24 @ $486+13 @ $502	$69,305
2018		(119 Units)13 @ $502+24 @ $486+37 @ $469+18 @ $454+26 @ $441+1 @ $428= $55609	32 @ $428	$13,696

Wighted Average Method 31 Dec 2018
Date	Goods Purchase( Units @ Cost)	Cost Of goods sold ( Units @ Cost)	Inventory ( Units @ Cost)	Balance ($)
1-Jan			33 @ $428+26 @ $441	$25,590
29-Jan	18 @ $454=$8172		33 @ $428+26 @ $441+18 @ $454	$33,762
4-Oct	37 @ $469 = $17353		33 @ $428+26 @ $441+18 @ $454+37 @ $469	$51,115
7-Nov	24 @ $486 = $11664		33 @ $428+26 @ $441+18 @ $454+37 @ $469+24 @ $486	$62,779
10-Dec	13 @ $502 = $6526		33 @ $428+26 @ $441+18 @ $454+37 @ $469+24 @ $486+13 @ $502 (Average $459)	$69,305
2018		119 @ $459= $54621	32 @ $459	$14,687

Date	Particulars	Debit($)	Credit($)
Dec 31,2018	Cost of Goods Sold	2064
	LIFO Reserve		2064
	year ending Adjust FIFO to LIFO(15760-13696)