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Intermediate Accounting: Reporting...

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

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

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

Chapter 7, Problem 13E, Alternative Inventory Methods Frate Company was formed on December 1, 2018, and uses the periodic

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. 1. FIFO
  2. 2. LIFO
  3. 3. Weighted average

Show supporting computations in good form.

1.

To determine

Ascertain the ending inventory for November under a) FIFO, b) LIFO and c) weighted average cost methods.

Explanation

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
ParticularsUnits (A)Unit Cost (B)Total Cost (C =A×B)
March 27,2019900$ 11.50 $ 10,350
February 17,2019600$ 11.00 $ 6,600
January 25,2019100$ 10.50 $ 1,050
March 31,2019 inventory1600 $ 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
ParticularsUnits (A)Unit Cost (B)Total Cost (C =A×B)
Beginning inventory800$ 9.00 $ 7,200
January 6,2019800$ 10.00 $ 8,000
March 31,2019 inventory1600 $ 15,200

Table (2)

The ending inventory under the LIFO method is $15,200

2.

To determine

Describe the effects of inventory cost flow on financial statements.

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