Question

You are provided with the following information for Sunland Inc. Sunland Inc. uses the periodic system of accounting for its inventory transactions.

March		1		Beginning inventory 1,950 liters at a cost of 60¢ per liter.
March		3		Purchased 2,475 liters at a cost of 65¢ per liter.
March		5		Sold 2,320 liters for $1.10 per liter.
March		10		Purchased 3,820 liters at a cost of 72¢ per liter.
March		20		Purchased 2,580 liters at a cost of 80¢ per liter.
March		30		Sold 5,160 liters for $1.25 per liter.

1 - Calculate the value of ending inventory that would be reported on the balance sheet, under each of the following cost flow assumptions. (Round answers to 2 decimal places, e.g. 125.25.)

(1)	Specific identification method assuming:
	(i)	The March 5 sale consisted of 1,000 liters from the March 1 beginning inventory and 1,320 liters from the March 3 purchase; and
	(ii)	The March 30 sale consisted of the following number of units sold from beginning inventory and each purchase: 500 liters from March 1; 545 liters from March 3; 2,900 liters from March 10; 1,215 liters from March 20.
(2)	FIFO
(3)	LIFO

2 - Prepare partial income statements through gross profit, under each of the following cost flow assumptions. (Round answers to 2 decimal places, e.g. 125.25.)

(1)	Specific identification method assuming:
	(i)	The March 5 sale consisted of 1,000 liters from the March 1 beginning inventory and 1,320 liters from the March 3 purchase; and
	(ii)	The March 30 sale consisted of the following number of units sold from beginning inventory and each purchase: 500 liters from March 1; 545 liters from March 3; 2,900 liters from March 10; 1,215 liters from March 20.
(2)	FIFO
(3)	LIFO

Income statement (partial)

Specific Identification	FIFO	LIFO
sales revenue
beginning inventory
purchases
cost of goods for sale
ending of inventory
cost of goods sold
gross profit (loss)

Answer 1

Correct Answer:

	Specific identification	FIFO	LIFO
Cost of Ending Inventory	$     2,420.9	$         2,615	$         2,077

Partial Income statement
	FIFO	LIFO	Specific identification
Sales Revenue	$           9,002.00	$                     9,002.00	$              9,002.00
Cost of Goods sold:
Beginning Inventory	$           1,170.00	$                     1,170.00	$              1,170.00
Add: Purchases	$           6,423.15	$                     6,423.15	$              6,423.15
Cost of goods available for sale	$           7,593.15	$                     7,593.15	$              7,593.15
Less: Ending Inventory	$           2,614.80	$                     2,076.75	$              2,420.90
Less: Cost of goods sold	$           4,978.35	$                     5,516.40	$              5,172.25
Gross Profit	$           4,023.65	$                     3,485.60	$              3,829.75

Working:

Cost of Goods Available for sale
	Litres	Cost per Litre	value
Beginning Inventory	1950	$           0.60	$              1,170.0
Purchases	2475	$           0.65	$              1,608.8
Purchases	3820	$           0.72	$            2,750.40
Purchases	2580	$           0.80	$              2,064.0
Total	10825		$            7,593.15

	FIFO
A	Total Litres Available for sale			10825			$                  7,593
	Litres Sold			7480
	Ending Inventory Litres			3345
	Valuation
	Cost of Goods Sold		1950		$                    0.60		$            1,170.00
			2475		$                    0.65		$                  1,609
			3055		$                    0.72		$            2,199.60
B	Cost of Goods Sold		7480	Litres			$                  4,978
A-B	Ending Inventory		3345	Litres			$                  2,615

	LIFO
A	Total Litres Available for sale			10825			$                  7,593
	Litres Sold			7480
	Ending Inventory Litres			3345
	Valuation
	Cost of Goods Sold		2580		$                    0.80		2,064.00
			3820		$                    0.72		2,750.40
			1080		$                    0.65		702.00
B	Cost of Goods Sold		7480	Litres			$            5,516.40
A-B	Ending Inventory		3345	Litres			$            2,076.75

Specific Identifications	Cost of Goods Available for sale			Cost of goods sold			Ending Inventory
	No. of Litres	Cost per unit	Cost of goods available for sale	No. of Litres	Cost per unit	Cost of goods sold	No. of Litres	Cost per unit	Ending Inventory
Beginning inventory	1950	$    0.60	$       1,170.00	1500	$     0.60	$             900	450	$     0.60	$         270.00
Purchases:
03-Mar	2475	$    0.65	$       1,608.75	1865	$     0.65	$         1,212	610	$     0.65	$         396.50
10-Mar	3820	$    0.72	$       2,750.40	2900	$     0.72	$         2,088	920	$     0.72	$         662.40
20-Mar	2580	$    0.80	$       2,064.00	1215	$     0.80	$             972	1365	$     0.80	$     1,092.00
Total	10825	$         -	$       7,593.15	7480		$         5,172	3345		$     2,420.90

	Litres	Selling price	Total
05-Mar	2320	$                             1.10	$              2,552.00
30-Mar	5160	$                             1.25	$              6,450.00
Total Revenue			$              9,002.00

End of Answer.

Thanks