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 1 year ago
Next > < Previous

Related Solutions

Johnson Company buys and resells a consumer product. Daniel is the manager of East Store of...
Johnson Company buys and resells a consumer product. Daniel is the manager of East Store of the company. He is authorized to make all sales-related decisions (such as prices, sales mix, advertising, promotion, etc.) and merchandise purchasing decisions (such as supplier selection, negotiating purchase prices, etc.). But he has no decision rights on purchasing or selling operating assets other than merchandise. Daniel is the manager of a(n): A. profit center B. operations center C. revenue center D. discretionary cost center...
6 – ​​​​​​​​​​ Strata Investors buys real estate, develops it, and resells it for a profit....
6 – ​​​​​​​​​​ Strata Investors buys real estate, develops it, and resells it for a profit. A new property is available, and Bud Strasta, the president and owner of Strasta Investors, believes if he purchases and develops this property it can then be sold for $160,000. The current property owner has asked for bids and stated that the property will be sold for the highest bid in excess of $100,000. Two competitors will be submitting bids for the property. Strasta...
Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these...
Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Worley sets its prices for all hospitals by marking up its cost of goods sold to those hospitals by 5%. For example, if a hospital buys supplies from Worley that had cost Worley $100 to buy from manufacturers, Worley would charge the hospital $105 to purchase these supplies.      For years, Worley believed that the 5% markup covered its selling...
Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these...
Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Worley sets its prices for all hospitals by marking up its cost of goods sold to those hospitals by 8%. For example, if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $108 to purchase these supplies. For years, Worley believed that the 8% markup covered its selling and...
Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these...
Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Worley sets its prices for all hospitals by marking up its cost of goods sold to those hospitals by 5%. For example, if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $105 to purchase these supplies. For years, Worley believed that the 5% markup covered its selling and...
Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these...
Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Worley sets its prices for all hospitals by marking up its cost of goods sold to those hospitals by 6%. For example, if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $106 to purchase these supplies. For years, Worley believed that the 6% markup covered its selling and...
Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these...
Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Worley sets its prices for all hospitals by marking up its cost of goods sold to those hospitals by 9%. For example, if a hospital buys supplies from Worley that had cost Worley $100 to buy from manufacturers, Worley would charge the hospital $109 to purchase these supplies.      For years, Worley believed that the 9% markup covered its selling...
Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these...
Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Worley sets its prices for all hospitals by marking up its cost of goods sold to those hospitals by 10%. For example, if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $110 to purchase these supplies. For years, Worley believed that the 10% markup covered its selling and...
Strassel Investors buys real estate, develops it, and resells it for a profit. A new property...
Strassel Investors buys real estate, develops it, and resells it for a profit. A new property is available, and Bud Strassel, the president and owner of Strassel Investors, believes if he purchases and develops this property, it can then be sold for $160,000. The current property owner has asked for bids and stated that the property will be sold for the highest bid in excess of $100,000. Two competitors will be submitting bids for the property. Strassel does not know...
Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these...
Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Worley sets its prices for all hospitals by marking up its cost of goods sold to those hospitals by 8%. For example, if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $108 to purchase these supplies. For years, Worley believed that the 8% markup covered its selling and...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT