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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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LIFO, Perpetual and Periodic Riedel Company’s inventory records showed the following transactions for the fiscal period ended June 30:

Chapter 7, Problem 14E, LIFO, Perpetual and Periodic Riedel Companys inventory records showed the following transactions for

Required:

  1. 1. Compute the ending inventory and the cost of goods sold under the LIFO cost flow assumption assuming both a perpetual and a periodic inventory system.
  2. 2. Next Level Explain the difference in the final inventory valuations.

1)

To determine

Determine the ending inventory and the cost of goods sold under LIFO method assuming both perpetual and a periodic inventory system.

Explanation

LIFO: In Last-in-First-Out method, items purchased recently are sold first. So, the value of the ending inventory consist the initial cost for the remaining unsold items.

Periodic inventory system: The method or system of recording the transactions related to inventory occasionally or periodically is referred as periodic inventory system.

Determine the ending inventory using LIFO method using periodic inventory system:

ParticularsUnitsPrice per unitAmount
Beginning inventory on June 01700$6.20$4,340
Add: Inventory purchased on June 03100$6.40$640
Ending inventory800 $4,980

Table (1)

Determine the cost of goods sold using LIFO method using periodic inventory system:

Cost of goods sold}=[Beginning inventory]+[Net purchases][Ending inventory]=[700×$6.40]+[(700×$6.40)+(600×$6

2)

To determine

Elaborate the difference in the final inventory valuation.

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