BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

Solutions

Chapter
Section
BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
32 views

Alternative Inventory Methods Park Company’s perpetual inventory records indicate the following transactions in the month of June:

Chapter 7, Problem 12E, Alternative Inventory Methods Park Companys perpetual inventory records indicate the following

Required:

  1. 1. Compute the cost of goods sold for June and the inventory at the end of June using each of the following cost flow assumptions:
    1. a. FIFO
    2. b. LIFO
    3. c. Average cost (Round unit costs to 3 decimal places and other amounts to the nearest dollar.)
  2. 2. Next Level Why are the cost of goods sold and ending inventory amounts different for each of the three methods? What do these amounts tell us about the purchase price of inventory during the year?
  3. 3. Next Level Which method produces the most realistic amount for net income? For inventory? Explain your answer.
  4. 4. Next Level If Park uses IFRS, which of the previous alternatives would be acceptable and why?

1 a

To determine

Calculate the ending inventories and the cost of goods sold for the month of June using FIFO method under perpetual system.

Explanation

Perpetual inventory system: The method or system of maintaining, recording, and adjusting the inventory perpetually throughout the year, is referred to as perpetual inventory system.

FIFO: In First-in-First-Out method, items purchased initially are sold first. So, the value of the ending inventory consist the recent cost for the remaining unsold items.

Compute the ending inventory and cost of goods sold for June using FIFO method:

DateParticularsCost of goods soldInventory Balance
UnitsCost per unitAmountUnitsCost per unitAmount
June      
01Beginning inventory200$3.20$640
03   200$3.20$640
Purchase  200$3.50 $700
    $1,340
06Sale (300) units200$3.20$640 100$3.50 $350
100$3.50 $350    
    $2,350
17  100$3...

1 b

To determine

Calculate the ending inventories and the cost of goods sold for the month of June using LIFO method under perpetual system.

1 c.

To determine

Calculate the ending inventories and the cost of goods sold for the month of June using average cost method.

2.

To determine

Explain the reasons behind the difference in cost of goods sold and ending inventory among three methods. Identify the trend of purchase prices of inventory during the year.

3.

To determine

Identify the method that produces accurate amount of net income and inventory and explain the same.

4.

To determine

Identify the alternative that would be acceptable by Company P, if it follows IFRS and also explain the reasons.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

Why do economists sometimes offer conflicting advice to policymakers?

Brief Principles of Macroeconomics (MindTap Course List)

Briefly explain what is meant by the term efficiency continuum.

Fundamentals of Financial Management (MindTap Course List)

DUPONT ANALYSIS A firm has been experiencing low profitability in recent years Perform an analysis of the firms...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

What is a context diagram?

Pkg Acc Infor Systems MS VISIO CD