Question

To more efficiently manage its inventory, Treynor Corporation maintains its internal inventory records using first-in, first-out (FIFO) under a perpetual inventory system. The following information relates to its merchandise inventory during the year:

Jan.		1		Inventory on hand—20,000 units; cost $12.20 each.
Feb.		12		Purchased 70,000 units for $12.50 each.
Apr.		30		Sold 50,000 units for $20.00 each.
Jul.		22		Purchased 50,000 units for $12.80 each.
Sep.		9		Sold 70,000 units for $20.00 each.
Nov.		17		Purchased 40,000 units for $13.20 each.
Dec.		31		Inventory on hand—60,000 units.

Required:
1. Determine the amount Treynor would calculate internally for ending inventory and cost of goods sold using first-in, first-out (FIFO) under a perpetual inventory system.
2. Determine the amount Treynor would report externally for ending inventory and cost of goods sold using last-in, first-out (LIFO) under a periodic inventory system. (Assume beginning inventory under LIFO was 20,000 units with a cost of $11.70).
3. Determine the amount Treynor would report for its LIFO reserve at the end of the year.
4. Record the year-end adjusting entry for the LIFO reserve, assuming the balance at the beginning of the year was $10,000.

Answer 1

ANSWER:

Requirement 1

First-in, first-out (FIFO)

Cost of goods sold:

Date of Cost of
Sale Units Sold Units Sold Total Cost

Apr. 30 20,000 (from Beg. Inv.) $12.20 $ 244,000
30,000 (from 2/12 purchase) 12.50 375,000
Sep. 9 40,000 (from 2/12 purchase) 12.50 500,000
30,000 (from 7/22 purchase) 12.80 384,000
Total 120,000 $1,503,000

Ending inventory = (20,000 units × $12.80) + (40,000 units × $13.20) = $784,000

Treynor would achieve the same result if it used FIFO on a periodic basis rather than a perpetual basis. Its 120,000 units sold consist of the beginning inventory of 20,000 units, all 70,000 units purchased on 2/12, and 30,000 units purchased on 7/22. Treynor’s numbers would be the same because, regardless of whether we view FIFO inventory on a perpetual or periodic basis, we always view the oldest units on hand as those that are the first to be sold.

Requirement 2

Last-in, first-out (LIFO)

Cost of goods available for sale:

Beginning inventory (20,000 × $12.20) $ 244,000

Purchases:

70,000 × $12.50 $875,000

50,000 × $12.80 640,000   

40,000 × $13.20 528,000 2,043,000

Cost of goods available (180,000 units) $2,287,000

Cost of goods available for sale (180,000 units) $2,287,000
Less: Ending inventory (determined below) (744,000)
Cost of goods sold $1,543,000

Cost of ending inventory:

Date of
purchase Units Unit cost Total cost

Beg. Inv. 20,000 $12.20 $244,000

Feb. 12 40,000 12.50 500,000

Total $744,000

Requirement 3

LIFO Reserve

Perpetual FIFO (Required 1) $ 784,000

Less: Periodic LIFO (Required 2) (744,000)

LIFO Reserve $ 40,000

Requirement 4

Cost of goods sold ................................................... 30,000

LIFO reserve ($40,000 − $10,000).............................. 30,000

NOTE: PLEASE.....UPVOTE....ITS REALLY HELPS ME....THANK YOU....SOOO MUCH....
Any qurries comment below i will explain or resolve until you got....
Please comment if any querry i will resolve as soon as possible