   Chapter 7, Problem 6P ### Intermediate Accounting: Reporting...

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

#### Solutions

Chapter
Section ### Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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# Alternative Inventory Methods Garrett Company has the following transactions during the months of April and May: The cost of the inventory on April 1 is $5,$4, and $2 per unit, respectively, under the FIFO, average, and LIFO cost flow assumptions.Required: 1. Compute the inventories at the end of each month and the cost of goods sold for each month for the following alternatives: a. FIFO periodic b. FIFO perpetual c. LIFO periodic d. LIFO perpetual e. Weighted average (Round unit costs to 4 decimal places.) f. Moving average (Round unit costs to 4 decimal places.) 2. Next Level Reconcile and explain the difference between the LIFO periodic and the LIFO perpetual results. 3. Next Level If Garrett uses IFRS, which of the previous alternatives would be acceptable, and why? 1(a) To determine Calculate the ending inventories at the end of each month and the cost of goods sold for each month using FIFO method under periodic system. Explanation FIFO: In First-in-First-Out method, items purchased initially are sold first. So, the value of the ending inventory consist the recent 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. Compute the ending inventory units:  Particulars April (in units) May (in units) Beginning inventory 400 550 Add: Net Purchases 300 250 Units available for sale 700 800 Less: Sales (150) (350) Ending inventory 550 450 Table (1) Compute the ending inventory for April and May using FIFO under Periodic system:  Ending inventory for April Particulars Amount 250 units at$5 per unit (250×$5)$ 1,250 200 units at $5.50 per unit (250×$5.50) $1,100 100 units at$5.75 per unit (100×$5.75)$ 575 Ending inventory $2,925 Table (2)  Ending inventory for May Particulars Amount ($) 100 units at $5.50 per unit (100×$5.50) $550 100 units at$5

1 (b)

To determine

Calculate the ending inventories at the end of each month and the cost of goods sold for each month using FIFO method under perpetual system.

1 (c)

To determine

Calculate the ending inventories at the end of each month and the cost of goods sold for each month using LIFO method under periodic system.

1 (d)

To determine

Calculate the ending inventories at the end of each month and the cost of goods sold for each month using LIFO method under perpetual system.

1 (e)

To determine

Calculate the ending inventories at the end of each month and the cost of goods sold for each month using average cost.

1 (f)

To determine

Calculate the ending inventories at the end of each month and the cost of goods sold for each month using moving average.

2.

To determine

Reconcile the differences in the result of LIFO periodic and LIFO perpetual.

3.

To determine

Identify the alternative that would be acceptable by Company G, if it follows IFRS and also explain the reasons.

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