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Intermediate Accounting: Reporting...
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Intermediate Accounting: Reporting...
Alternative Inventory Methods Frate Company was formed on December 1, 2018, and uses the periodic inventory system. The following information is available from Frate’s inventory records for Product Ply:
A physical inventory on March 31, 2019, shows 1,600 units on hand.
Required:
Prepare schedules to compute the ending inventory at March 31, 2019, under each of the following inventory methods:
- 1. FIFO
- 2. LIFO
- 3. Weighted average
Show supporting computations in good form.
1.
Ascertain the ending inventory for November under a) FIFO, b) LIFO and c) weighted average cost methods.
Inventory:
Inventory refers to the entire stock of goods purchased, goods utilized and goods maintained by the company in the course of the regular business activities.
Compute the ending inventory as on March 31, 2019:
- FIFO Method:
| Company F | |||
| Computation of Inventory cost under FIFO Method | |||
| March 31,2019 | |||
| Particulars | Units (A) | Unit Cost (B) | Total Cost |
| March 27,2019 | 900 | $ 11.50 | $ 10,350 |
| February 17,2019 | 600 | $ 11.00 | $ 6,600 |
| January 25,2019 | 100 | $ 10.50 | $ 1,050 |
| March 31,2019 inventory | 1600 | Â | $ 18,000 |
Table (1)
The ending inventory under the FIFO method is $18,000.
- LIFO Method:
| Company F | |||
| Computation of Inventory cost under FIFO Method | |||
| March 31,2019 | |||
| Particulars | Units (A) | Unit Cost (B) | Total Cost |
| Beginning inventory | 800 | $ 9.00 | $ 7,200 |
| January 6,2019 | 800 | $ 10.00 | $ 8,000 |
| March 31,2019 inventory | 1600 | Â | $ 15,200 |
Table (2)
The ending inventory under the LIFO method is $15,200
2.
Describe the effects of inventory cost flow on financial statements.
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