Question

In: Accounting

Green Plus Ltd has the following information that relates to the entity’s inventory record in the month of April.

Question 1: Inventory cost assignment

Green Plus Ltd has the following information that relates to the entity’s inventory record in the month of April.

April

Units

Unit cost

Total cost

1

Beginning inventory

300

$ 3.00

$   900

12

Purchases

600

2.80

1 680

24

Purchases

700

2.70

1 890

1 600

$ 4 470

16

Sales

300

29

Sales

600

Green Plus Ltd uses the perpetual inventory system. Selling price for each unit is $4.00. A physical inventory count on 30 April showed that 600 units were on hand. Ignore GST.

Required

  1. Calculate the cost of sales using the following methods:
  1. FIFO
  2. LIFO                                                                
  1. Calculate gross profit for the month of April based on each of the two methods used in requirement 1.
  2. Based on your results in requirement 2, state which cost flow method resulted in the highest gross profit. Discuss your answer - why does this costing method lead to the highest gross profit?
  3. If Green Plus used the periodic inventory system instead, discuss whether cost of sales would be the same as in requirement 1 under FIFO.
  4. If Green Plus used the periodic inventory system instead, discuss whether cost of sales would be the same as in requirement 1 under LIFO.

Solutions

Expert Solution


ekkarill92 answered 1 year ago
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