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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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CONTINUING PROBLEM: FRONT ROW ENTERTAINMENT

In addition to developing online fan communities, Cam and Anna believe that they could increase Front Row Entertainment’s revenue by selling live-performance DVDs at the concert.

Front Row records the following activity between May and August 2019 for one of its artists:

Chapter 6, Problem 82.1C, CONTINUING PROBLEM: FRONT ROW ENTERTAINMENT In addition to developing online fan communities, Cam

Front Row sells all of its DVDs for $15 each and uses a perpetual inventory system. Required:

Required:

Compute ending inventory and cost of goods sold using the FIFO, LIFO, and average cost methods. ( Note: Use four decimal places for per-unit calculations and round all other numbers to the nearest penny.)

To determine

Introduction:

The first in, first out (FIFO) method of inventory valuation is a cost stream supposition that the first products obtained are likewise the first merchandise sold. In many organizations, this presumption intently coordinates the genuine stream of merchandise, as is viewed as the most hypothetically right inventory valuation method.

The average cost method is an inventory costing method in which the cost of every thing in an inventory is determined on the basis of the average cost of every comparative great in the inventory. The average cost method is determined by partitioning the cost of products in inventory by the absolute number of things accessible available to be purchased.

To choose:

Compute ending inventory and cost of goods sold using the FIFO, LIFO and average cost method.

Explanation

Under the FIFO method

Date Activity Units Rate (cost) Total
10 may Sale 180 8.25 1485
12 june Sale 60
90
8.25
8.75
495
787.5
5 July Sale 135 8.75 1181.25
20 Aug Sale 75
35
8.75
9.25
656.25
323.75
Total 4928.75

Cost of goods sold = $4928.75

Ending inventory = 155 × $9.25 = $1433.75

Under the LIFO method

Date Activity Units Rate (cost) Total
10 may Sale 180 8.25 1485
12 june Sale 150 8.75 1312.5
5 July Sale 135 8.75 1181.25
20 Aug Sale 110 9.25 1017.5
Total 4996

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