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In: Accounting

Practice Problem 01 a, b1-b2, c Sunland Company had a beginning inventory on January 1 of...

Practice Problem 01 a, b1-b2, c

Sunland Company had a beginning inventory on January 1 of 270 units of Product 4-18-15 at a cost of $19 per unit. During the year, the following purchases were made.
Mar. 15 720 units at $22 Sept. 4 630 units at $25
July 20 450 units at $23 Dec. 2 180 units at $28

1,800 units were sold. Sunland Company uses a periodic inventory system.
Determine the cost of goods available for sale.
The cost of goods available for sale $
Calculate average cost per unit. (Round answer to 2 decimal places, e.g. 2.23.)
Average cost per unit $
Determine (1) the ending inventory, and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost). Prove the accuracy of the cost of goods sold under the FIFO and LIFO methods. (Round answers to 0 decimal places, e.g. 1,250.)

FIFO

LIFO

AVERAGE-COST
The ending inventory $ $ $
The cost of goods sold $ $ $
Which cost flow method results in (1) the highest inventory amount for the balance sheet, and (2) the highest cost of goods sold for the income statement?
(1)

FIFOLIFOAverage-cost

results in the highest inventory amount, $ .
(2)

FIFOLIFOAverage-cost

produces the highest cost of goods sold, $ .

Solutions

Expert Solution

Average cost = Total cost of inventory/total no. of units = (5130+15840+10350+15750+5040)/2250= $23.16

FIFO

January 1-  270 units @ $19

March 15- 720 units @ $22

July 20 - 450 units @ 23

Sept 4- 630 units @25

Dec 2 - 180 units @28

Sale - 1800 units

COGS -  270 units @ $19 + 720 units @ $22 + 450 units @ 23 + 360 units @25 = 5130+15840+10350+9000

= $40320

Closing inventory- 270 units @25 +180 units @28= 6750+5040 = $11,790

LIFO

January 1-  270 units @ $19

March 15- 720 units @ $22

July 20 - 450 units @ 23

Sept 4- 630 units @25

Dec 2 - 180 units @28

Sale - 1800 units

COGS -  180 units @28 + 630 units @25 + 450 units @ 23 + 540 units @22 = 5040+15750+10350+11880=

= $43020

Closing inventory- 180 units @22 +270 units @ $19= $3960+$5130 = $9090

Average cost

Average cost = Total cost of inventory/total no. of units = (5130+15840+10350+15750+5040)/2250= $23.16

COGS = 1800*23.16 = $41,688

Closing Inventory = 450*23.16 = $10,422

Hence,

Highest cogs - LIFO

Highest Closing Inventory - FIFO

ekkarill92 answered 1 year ago
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