Question
In: Accounting
To more efficiently manage its inventory, Treynor Corporation maintains its internal inventory records using first-in, first-out...
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 $13.10 each. | ||
| Feb. | 12 | Purchased 70,000 units for $13.40 each. | ||
| Apr. | 30 | Sold 50,000 units for $20.90 each. | ||
| Jul. | 22 | Purchased 50,000 units for $13.70 each. | ||
| Sep. | 9 | Sold 70,000 units for $20.90 each. | ||
| Nov. | 17 | Purchased 40,000 units for $14.10 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 $12.60).
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.
Solutions
Expert Solution
| Solution: 1 | ||||||||||
| FIFO METHOD | PURHASES | COST OF GOODS SOLD | ENDING INVENTORY | |||||||
| Date | Particulars | Units | Rate | Total Cost | Units | Rate | Total Cost | Units | Rate | Total Cost |
| Jan. 01 | Beginning inventory | 20000 | $ 13.10 | $ 262,000 | ||||||
| Feb.12 | Purchases | 70000 | $ 13.40 | $ 938,000 | 20000 | $ 13.10 | $ 262,000 | |||
| 70000 | $ 13.40 | $ 938,000 | ||||||||
| Apr.30 | Sales | 20000 | $ 13.10 | $ 262,000 | ||||||
| 30000 | $ 13.40 | $ 402,000 | 40000 | $ 13.40 | $ 536,000 | |||||
| July.22 | Purchases | 50000 | $ 13.70 | $ 685,000 | 40000 | $ 13.40 | $ 536,000 | |||
| 50000 | $ 13.70 | $ 685,000 | ||||||||
| Sept.09 | Sales | 40000 | $ 13.40 | $ 536,000 | ||||||
| 30000 | $ 13.70 | $ 411,000 | 20000 | $ 13.70 | $ 274,000 | |||||
| Nov.17 | Purchases | 40000 | $ 14.10 | $ 564,000 | 20000 | $ 13.70 | $ 274,000 | |||
| 40000 | $ 14.10 | $ 564,000 | ||||||||
| Total | 160000 | $ 2,187,000 | 120000 | $ 1,611,000 | 60000 | $ 838,000 | ||||
| Solution: 2 | ||||||||||
| LIFO METHOD | PURHASES | COST OF GOODS SOLD | ENDING INVENTORY | |||||||
| Jan. 01 | Beginning inventory | 20000 | $ 12.60 | $ 252,000 | ||||||
| Feb.12 | Purchases | 70000 | $ 13.40 | $ 938,000 | 20000 | $ 12.60 | $ 252,000 | |||
| 70000 | $ 13.40 | $ 938,000 | ||||||||
| Apr.30 | Sales | 50000 | $ 13.40 | $ 670,000 | 20000 | $ 12.60 | $ 252,000 | |||
| 20000 | $ 13.40 | $ 268,000 | ||||||||
| July.22 | Purchases | 50000 | $ 13.70 | $ 685,000 | 20000 | $ 12.60 | $ 252,000 | |||
| 20000 | $ 13.40 | $ 268,000 | ||||||||
| 50000 | $ 13.70 | $ 685,000 | ||||||||
| Sept.09 | Sales | 50000 | $ 13.70 | $ 685,000 | ||||||
| 20000 | $ 13.40 | $ 268,000 | 20000 | $ 12.60 | $ 252,000 | |||||
| Nov.17 | Purchases | 40000 | $ 14.10 | $ 564,000 | 20000 | $ 12.60 | $ 252,000 | |||
| 40000 | $ 14.10 | $ 564,000 | ||||||||
| Total | 160000 | $ 2,187,000 | 120000 | $ 1,623,000 | 60000 | $ 816,000 | ||||
| Solution: 3 | ||||||||||
| Lifo Reserve = | Ending inventory as per LIFO | "-" | Ending inventory as per FIFO | |||||||
| Lifo Reserve = | $ 816,000 | "-" | $ 838,000 | |||||||
| Lifo Reserve = | $ (22,000) | |||||||||
| Solution: 4 | ||||||||||
| Beginning LIFO reserve | $ 10,000 |
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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.
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Purchased 40,000 units for...
To more efficiently manage its inventory, Treynor Corporation maintains its internal inventory records using first-in, first-out...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...
To more efficiently manage its inventory, Treynor Corporationmaintains its internal inventory records using first-in, first-out...To more efficiently manage its inventory, Treynor Corporation
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