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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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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:

Chapter 7, Problem 5P, Cost of Goods Sold As an accountant for Lee Company, your supervisor gave you the following , example  1

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:

Chapter 7, Problem 5P, Cost of Goods Sold As an accountant for Lee Company, your supervisor gave you the following , example  2

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.

To determine

Prepare the ending inventory and cost of goods sold schedule under the three alternatives given.

Explanation

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:

ParticularsUnits
Beginning inventory12,000
Add: Net Purchases18,000
Units available for sale30,000
Less: Sales(10,000)
Ending inventory20,000

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
ParticularsFIFOLIFOAverage 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:

ParticularsAmount ($)
20,000 units at $21...

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