Question

In: Accounting

Hill Marble buys and then resells a single product. The product, a marble, is a commodity...

Hill Marble buys and then resells a single product. The product, a marble, is a commodity and is subject to rather severe cost fluctuations. Some information concerning Hill Marble inventory activity during the month of June 2020 follows:

June 2          Had 860 units on hand, @ $7 per unit

June 6          Sold 400 units

June 8          Purchased 1,000 units @ $11 per unit

June 12         Purchased 400 units @ $9 per unit

June 15         Sold 600 units

June 21         Purchased 300 units @ $6 per unit

June 24         Sold 800 units

June 30         Purchased 100 units @ $8 per unit

Required:

Hill Marble uses a periodic inventory system. Calculate cost of goods sold (in both units and cost) for the month of June 2020 and ending inventory (units and cost) at June 30, 2020:

  1. FIFO.                                                                                                                    
  2. LIFO.                                                                                                                     
  3. Which method resulted in the highest cost of goods sold for June?                          
  4. Which one will provide the highest ending inventory value for Hill's balance sheet?

  

Solutions

Expert Solution

a. FIFO

Date Purchases Sales Balance
Qty Rate Amount Qty Rate Amount Qty Rate Amount
2-Jun Balance 860 7 6020
6-Jun Sales 400 7 2800 460 7 3220
8-Jun Purchases 1000 11 11000 460 7 3220
1000 11 11000
12-Jun Purchases 400 9 3600 460 7 3220
1000 11 11000
400 9 3600
15-Jun Sales 460 7 3220 860 11 11000
140 11 1540 400 9 3600
21-Jun Purchases 300 6 1800 860 11 11000
400 9 3600
300 6 1800
24-Jun Sales 800 11 8800 60 11 11000
400 9 3600
300 6 1800
30-Jun Purchases 100 8 800 60 11 11000
400 9 3600
300 6 1800
100 8 8

B. LIFO

Date Purchases Sales Balance
Qty Rate Amount Qty Rate Amount Qty Rate Amount
2-Jun Balance 860 7 6020
6-Jun Sales 400 7 2800 460 7 3220
8-Jun Purchases 1000 11 11000 460 7 3220
1000 11 11000
12-Jun Purchases 400 9 3600 460 7 3220
1000 11 11000
400 9 3600
15-Jun Sales 400 9 3600 460 7 3220
200 11 2200 800 11 8800
21-Jun Purchases 300 6 1800 460 7 3220
800 11 8800
300 6 1800
24-Jun Sales 300 6 1800 460 7 3220
500 11 5500 300 11 3300
30-Jun Purchases 100 8 800 460 7 3220
300 11 3300
100 8 800

c. FIFO method results in higher cost of goods sold.

d. FIFO method ends in higher inventory value.

ekkarill92 answered 2 years ago
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