Question
In: Accounting
36) Gabby Company operates under a perpetual inventory system. It began operations on March 1, 20X9,...
36) Gabby Company operates under a perpetual inventory system. It began operations on March 1, 20X9, and had the following transactions affecting inventory during March, 20X9.
March 1 Purchase 500 units @ $5.00 $2,500
March 5 Sale 200 units
March 10 Purchase 300 units @ $5.20 $1,560
March 15 Sale 320 units
March 20 Purchase 400 units @ $5.40 $2,160
March 25 Sale 230 units
Determine the cost of goods sold for the month of March, 20X9 and the ending inventory balance at March 31, 20X9. Assume the company uses the first-in-first-out (FIFO) cost flow assumption.
37) Gabby Company operates under a perpetual inventory system. It began operations on March 1, 20X9, and had the following transactions affecting inventory during March, 20X9.
March 1 Purchase 500 units @ $5.00$2,500
March 5 Sale 200 units
March 10 Purchase 300 units @ $5.20 $1,560
March 15 Sale 320 units
March 20 Purchase 400 units @ $5.40 $2,160
March 25 Sale 230 units
Assume the company is trying to decide between the periodic method and the perpetual method. Gabby has decided to use the last-in-first-out cost flow assumption. Determine the cost of goods sold for the month of March, 20X9 and the ending inventory balance at March 31, 20X9, using both the perpetual method and the periodic method.
Solutions
Expert Solution
| Ans. 36 | Perpetual FIFO: | |||||||||
| Purchase | Cost of goods sold | Balance | ||||||||
| Date | Quantity | Rate | Total cost | Quantity | Rate | Total cost | Quantity | Rate | Total cost | |
| 1-Mar | 500 | $5.00 | $2,500 | 500 | $5.00 | $2,500 | ||||
| 5-Mar | 200 | $5.00 | $1,000 | 300 | $5.00 | $1,500 | ||||
| 10-Mar | 300 | $5.20 | $1,560 | 300 | $5.00 | $1,500 | ||||
| 300 | $5.20 | $1,560 | ||||||||
| 15-Mar | 300 | $5.00 | $1,500 | |||||||
| 20 | $5.20 | $104 | 280 | $5.20 | $1,456 | |||||
| 20-Mar | 400 | $5.40 | $2,160 | 280 | $5.20 | $1,456 | ||||
| 400 | $5.40 | $2,160 | ||||||||
| 25-Mar | 230 | $5.20 | $1,196 | 50 | $5.20 | $260 | ||||
| 400 | $5.40 | $2,160 | ||||||||
| Total | Cost of goods sold | $3,800 | Ending inventory | $2,420 | ||||||
| *In FIFO method the units that have purchased first (earliest), are released the first one and the ending inventory | ||||||||||
| units remain from the last (recent) purchases. | ||||||||||
| Ans. 37 | LIFO: | |||||||||
| Purchase | Cost of goods sold | Balance | ||||||||
| Date | Quantity | Rate | Total cost | Quantity | Rate | Total cost | Quantity | Rate | Total cost | |
| 1-Mar | 500 | $5.00 | $2,500 | 500 | $5.00 | $2,500 | ||||
| 5-Mar | 200 | $5.00 | $1,000 | 300 | $5.00 | $1,500 | ||||
| 10-Mar | 300 | $5.20 | $1,560 | 300 | $5.00 | $1,500 | ||||
| 300 | $5.20 | $1,560 | ||||||||
| 15-Mar | 300 | $5.20 | $1,560 | |||||||
| 20 | $5.00 | $100 | 280 | $5.00 | $1,400 | |||||
| 20-Mar | 400 | $5.40 | $2,160 | 280 | $5.00 | $1,400 | ||||
| 400 | $5.40 | $2,160 | ||||||||
| 25-Mar | 230 | $5.40 | $1,242 | 280 | $5.00 | $1,400 | ||||
| 170 | $5.40 | $918 | ||||||||
| Total | Cost of goods sold | $3,902 | Ending inventory | $2,318 | ||||||
| *In LIFO method the units that have purchased last, are released the first one and the ending inventory | ||||||||||
| units remain from the first purchases. | ||||||||||
| Periodic LIFO: | ||||||||||
| Total units sold (200+320+230) = 750 units | ||||||||||
| LIFO: | Cost of goods available for sale | Cost of goods sold - Periodic LIFO | Ending inventory - Periodic LIFO | |||||||
| Units | Rate | Total | Units | Rate | Total | Units | Rate | Total | ||
| 1-Mar | 500 | $5.00 | $2,500 | 50 | $5.00 | $250 | 450 | $5.00 | $2,250 | |
| 10-Mar | 300 | $5.20 | $1,560 | 300 | $5.20 | $1,560 | 0 | $5.20 | $0 | |
| 20-Mar | 400 | $5.40 | $2,160 | 400 | $5.40 | $2,160 | 0 | $5.40 | $0 | |
| Total | 1200 | $6,220 | 750 | $3,970 | 450 | $2,250 | ||||
| Cost of goods sold under Periodic LIFO method = $3,970. | ||||||||||
| Ending inventory under Periodic LIFO method = $2,250. | ||||||||||
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