Question

During the year, Trombley Incorporated has the following inventory transactions. Number of Units 27 Date Transaction Jan. 1 Beginning inventory Mar. 4 Purchase Jun. 9 Purchase Nov.11 Purchase Unit Cost $ 29 28 27 32 37 Total Cost $ 783 896 999 925 $3,603 37 25 133 For the entire year, the company sells 100 units of inventory for $37 each.

Answer 1

Answers

• [1]

FIFO	Cost of Goods available for sale			Cost of Goods Sold			Ending Inventory
	Units	Cost/unit	COG for sale	Units sold	Cost/unit	COGS	Units	Cost/unit	Ending inventory
Beginning Inventory	27	$                29.00	$                            783.00	27	$               29.00	$                     783.00	0	$                 29.00	$                         -
Purchases:
04-Mar	32	$                28.00	$                            896.00	32	$               28.00	$                     896.00	0	$                 28.00	$                         -
09-Jun	37	$                27.00	$                            999.00	37	$               27.00	$                     999.00	0	$                 27.00	$                         -
11-Nov	37	$                25.00	$                            925.00	4	$               25.00	$                     100.00	33	$                 25.00	$                825.00
TOTAL	133		$                        3,603.00	100		$                 2,778.00	33		$                825.00

	FIFO
Sales Revenue	$      3,700.00
(-) Cost of Goods Sold (as calculated above)	$      2,778.00
Gross Margin	$          922.00

• [2]

LIFO	Cost of Goods available for sale			Cost of Goods Sold			Ending Inventory
	Units	Cost/unit	COG for sale	Units sold	Cost/unit	COGS	Units	Cost/unit	Ending inventory
Beginning Inventory	27	$                29.00	$                            783.00	0	$               29.00	$                              -	27	$                 29.00	$                783.00
Purchases:
04-Mar	32	$                28.00	$                            896.00	26	$               28.00	$                     728.00	6	$                 28.00	$                168.00
09-Jun	37	$                27.00	$                            999.00	37	$               27.00	$                     999.00	0	$                 27.00	$                        -
11-Nov	37	$                25.00	$                            925.00	37	$               25.00	$                     925.00	0	$                 25.00	$                         -
TOTAL	133		$                        3,603.00	100		$                 2,652.00	33		$                951.00

	LIFO
Sales Revenue	$              3,700.00
(-) Cost of Goods Sold (as calculated above)	$              2,652.00
Gross Margin	$              1,048.00

• [3]

Average Method	Cost of Goods available for sale			Cost of Goods Sold			Ending Inventory
	Units	Cost/unit	COG for sale	Units sold	Cost/unit	COGS	Units	Cost/unit	Ending inventory
Beginning Inventory	27	$                29.00	$                            783.00
Purchases:
04-Mar	32	$                28.00	$                            896.00
09-Jun	37	$                27.00	$                            999.00
11-Nov	37	$                25.00	$                            925.00
TOTAL	133	$            27.0902	$                        3,603.00	100	$          27.0900	$                 2,709.00	33	$            27.0900	$                893.97

	Weighted Average Method
Sales Revenue	$                 3,700.00
(-) Cost of Goods Sold (as calculated above)	$                 2,709.00
Gross Margin	$                     991.00

• [4]
  LIFO method will give higher profitability at the time of declining prices, because Cost of Goods Sold will be based on latest lower prices.
  Lower cost of goods sold = Higher gross profits = Higher net Income