Question

10) Madison, Inc. had the following balances and transactions during 2017 Beginning Inventory June 10 December 30 December 31 40 units at $72 Purchased 120 units at $76 Sold 113 units Replacement cost $79 The company maintains its records of inventory on a perpetual basis using the last-in, first-out inventory costing method. Calculate the amount of ending Merchandise Inventory at December 31, 2017 using the lower-of-cost-or-market rule. (Round any intermediate calculations two decimal places, and your final answer to the nearest dollar.) A) $2,880 B) $3,572 C) $3,713 D) $3,412 11) Under which of the following inventory costing methods is the ending inventory based on the costs of the most recent purchases? A) specific identification B) last-in, first-out C) first-in, first-out D) weighted average

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and format. For detailed answer refer to the supporting sheet.

E F G H I J K L M A B C D 1 Answer 2 3 Part 10) 4 The correct answer is D) $ 3412 5 Explanation in prepetual costing method goods which are purchased last are sold first. So, in our case if we apply LIFO method, we will have 7 40 units of $ 72 purchase per unit and 7 units (120-113) of $76 per unit purchase 8 As per companypolicy we have to value inventory at cost or market value which ever is lower, in our case replacement cost is more than cost, so ending inventory will bevalue at 9 cost 10 So end ing inventory LIFO = (40*72)+(7*76) 11 = $ 3412 12 13 Thus the correct answer is $ 3412 14 15 Part 11) 16 The correct answer is B) First in First Out 17 18 Explanation 19 In fifo method, the purchases which are made first are sold first, so the ending inventory comprises of most recent purchases 20 21