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Intermediate Accounting: Reporting...
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Intermediate Accounting: Reporting...
Cost of Goods Sold As an accountant for Lee Company, your supervisor gave you the following calculations of the gross profit for the first quarter:
The three alternative cost flow assumptions are FIFO, average, and LIFO (the alternatives are not necessarily presented in this sequence). Lee uses the periodic inventory system. The computation of the cost of goods sold under each alternative is based on the following data:
Required:
Prepare schedules computing the ending inventory (in units and dollars) and proving the cost of goods sold shown here under each of the three alternatives.
Prepare the ending inventory and cost of goods sold schedule under the three alternatives given.
Cost of goods sold: Cost of goods sold is the total of all the expenses incurred by a company to sell the goods during the given period.
Prepare the ending inventory schedule of Company L:
| Particulars | Units |
| Beginning inventory | 12,000 |
| Add: Net Purchases | 18,000 |
| Units available for sale | 30,000 |
| Less: Sales | (10,000) |
| Ending inventory | 20,000 |
Table (1)
Prepare the cost of goods sold schedule of Company L:
| Company L | |||
| Schedule for Cost of goods sold | |||
| For the Quarter ended 31st March | |||
| Particulars | FIFO | LIFO | Average Cost |
| Beginning inventory | $ 240,000 | $ 240,000 | $ 240,000 |
| Add: Net Purchases | $ 400,000 | $ 400,000 | $ 400,000 |
| Cost of goods available for sale | $ 640,000 | $ 640,000 | $ 640,000 |
| Less: Ending inventory | ($ 440,000) | ($ 412,000) | ($ 426,667) |
| Cost of goods sold | $ 200,000 | $ 228,000 | $ 213,333 |
Table (2)
Compute the ending inventory under average cost method:
| Particulars | Amount ($) |
| 20,000 units at $21... |
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