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Effects of FIFO and LIFO
Sheepskin Company sells to colleges and universities a special paper that is used for diplomas. Sheepskin typically makes one purchase of the special paper each year on January 1. Assume that Sheepskin uses a perpetual inventory system. You have the following data for the 3 years ending in 2019:
Required:
1. What would the ending inventory and cost of goods sold be for each year if FIFO is used?
2. What would the ending inventory and cost of goods sold be for each year if LIFO is used?
3. CONCEPTUAL CONNECTION For each year, explain the cause of the differences in cost of goods sold under FIFO and LIFO.
(a)
Inventory costing methods:
FIFO and LIFO are those methods which are used for calculation of closing inventory and cost of goods sold.
The cost of ending inventory and the cost of goods sold using the FIFO.
The given information is as follows:
Total available units are:
In the year
In the year
Opening Inventory
In the year
Opening Inventory
Calculation of Closing Inventory as per FIFO Method:
Under this method, which material purchased first, issued first for production
(b)
Inventory costing methods:
FIFO and LIFO are those methods which are used for calculation of closing inventory and cost of goods sold.
The cost of ending inventory and the cost of goods sold using the LIFO.
(c)
Inventory costing methods:
FIFO and LIFO are those methods which are used for calculation of closing inventory and cost of goods sold.
The reason for difference in cost of goods sold under both methods.
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