Question

Exercise 8-11 Swifty Company’s record of transactions for the month of April was as follows. Purchases Sales April 1 (balance on hand) 420 @ $6.00 April 3 350 @ $10.00 4 1,050 @ 6.08 9 980 @ 10.00 8 560 @ 6.40 11 420 @ 11.00 13 840 @ 6.50 23 840 @ 11.00 21 490 @ 6.60 27 630 @ 12.00 29 350 @ 6.79 3,220 3,710

Assuming that periodic inventory records are kept in units only, calculate the average-cost per unit. (Round answer to 2 decimal places, e.g. 2.76.) Average-cost per unit $ per unit LINK TO TEXT

Assuming that periodic inventory records are kept in units only, compute the inventory at April 30 using LIFO and average-cost. (Round answer to 0 decimal places, e.g. 2,760.) LIFO $ Average-cost $ LINK TO TEXT

Assuming that perpetual inventory records are kept in dollars, determine the inventory using (1) FIFO and (2) LIFO. (Round answer to 0 decimal places, e.g. 2,760.) (1) FIFO (2) LIFO Inventory $ $ LINK TO TEXT

Compute cost of goods sold assuming periodic inventory procedures and inventory priced at FIFO. (Round answer to 0 decimal places, e.g. 2,760.) Cost of goods sold $ LINK TO TEXT

In an inflationary period, which inventory method—FIFO, LIFO, average-cost—will show the highest net income?     Average-cost    FIFO    LIFO     inventory method will show the highest net income.

Answer 1

Periodic Method Average Cost Method No of units Unit cost Total Cost Date Activity $ 420$ 6.00 1050 6.08 $ 2,520.00 01-Apr Beginning Inventory 04-Apr purchase 6,384.00 08-Apr purchase 13-Apr purchase 21-Apr purchase 29-Apr purchase 560 6.40 $ 3,584.00 840 $ $ 5,460.00 6.50 490 $ 6.60 $ 3,234.00 350$ 6.79 $ 2,376.50 Cost of goods available for sale 23,558.50 $ Average Cost per Unit $23558.50/3710 6.35

Periodic Method LIFO Method Units No of units Unit cost Total Cost Purchases Date Activity 01-Apr Beginning Inventory 04-Apr purchase 3710 420 6.00 1050 6.08 $ 560 $ 6.40 Less : Sales 2,520.00 490 6,384.00 Ending Inventory 3220 08-Apr purchase 13-Apr purchase 3,584.00 840 $ 6.50 $ 5,460.00 21-Apr purchase 490 $ 6.60 $ 3,234.00 $ 29-Apr purchase 350 6.79 2,376.50 Cost of goods available for sale 23,558.50 Ending Inventory 490 units 420 units @ $6 $ 2,520 70 units @ $6.08 426 Cost of Ending Inventory 2,946 Note LIFO Method assumes that goods which are purchased last will be sold first SO. Ending inventory consists of units which are purchased first

Periodic Method Average Cost Method Units Activity No of units Unit cost Total Cost Purchases Date 3710 420 6.00 1050 $ 6.08 $ 01-Apr Beginning Inventory 04-Apr purchase Less: Sales 2,520.00 490 6,384.00 Ending Inventory 3220 560 6.40 $ 08-Apr purchase 13-Apr purchase 3,584.00 840 $ 6.50 $ 5,460.00 490 $ 6.60 21-Apr purchase 3,234.00 29-Apr purchase 350 6.79 2,376.50 Cost of goods available for sale 23,558.50 $23558.50/3710 $ Average Cost per Unit 6.35 Ending Inventory 490 units 490 units@ $6.35 $ 3,112 Cost of Ending Inventory $ 3,112 Note Avg cost method assumes that goods are sold at avg cost per unit Therefore, Ending inventory will also be valued at avg cost per unit Round off taken upto 2 decimals Note

Perpetual System FIFO Method Cost of goods sold Purchases Date Inventory Quantity unit cost total cost 4206.00 2,520.00 unit cost Total cost Quantity unit cost Total cost Quantity Apr-01 350 6.00 70 6.00 $ 2,100.00 Apr-03 420.00 1050 $ 6.08 70 6.00 Apr-04 6,384.00 420.00 1050 $6.08 $6,384.00 560 6.40 70$6.00 $ 3,584.00 Apr-08 420.00 1050 6.08 6,384.00 560 6.40 3,584.00 70$ 6.00 140 6.08 560 6.40 $ 09-Apr 420.00 851.20 $ 5,532.80 910 6.08 3,584.00 280 6.40 1,792.00 140 6.08 $ 851.20 $1,792.00 11-Apr 280 6.40 840 6.50 280 6.40 5,460.00 1,792.00 13-Apr 840 6.50 5,460.00 490 6.60 $ 3,234.00 280 6.40 $1,792.00 21-Apr 840 6.50 5,460.00 3,234.00 490$6.60 23-Apr 280 6.40 280 6.50 1,792.00 1,820.00 490 6.60 560 $ 6.50 3,640.00 3,234.00 280 6.50 140 6.60 $ 27-Apr 1,820.00 924.00 350 6.60 $2,310.00 350 6.79 2,376.50 140 6.60 $ 29-Apr 924.00 350 6.79 2,376.50 $ 3,301 490 AA AA

Perpetual System LIFO Method Cost of goods sold Purchases Date Inventory Quantity unit cost total cost 4206.00 2,520.00 unit cost Total cost Quantity unit cost Total cost Quantity Apr-01 350 6.00 70 6.00 $ 2,100.00 Apr-03 420.00 1050 $ 6.08 70 6.00 6,384.00 Apr-04 420.00 1050 $6.08 6,384.00 560 6.40 70$6.00 $ 3,584.00 420.00 Apr-08 1050 $6.08 6,384.00 560 6.40 3,584.00 560 6.40 3,584.00 70 6.00 $ 09-Apr 420.00 420 6.08 630 6.08 3,830.40 2,553.60 420 6.08 $2,553.60 70 6.00 $ 11-Apr 420.00 210 $6.08 $1,276.80 840 $ 70 6.00 5,460.00 420.00 13-Apr 6.50 210 6.08 1,276.80 840 6.50 5,460.00 490 6.60 $ 3,234.00 70 6.00 $ 21-Apr 420.00 210 6.08 $1,276.80 840 6.50 5,460.00 490 6.60 3,234.00 490 6.60 70$6.00 $ 23-Apr 420.00 3,234.00 350 6.50 2,275.00 210 6.08 490 6.50 1,276.80 3,185.00 490 6.50 70$6.00 $ 27-Apr 3,185.00 420.00 140 6.08 $ 70 6.08 $ 851.20 425.60 350 6.79 2,376.50 70 6.00 29-Apr $ 420.00 70 6.08 $ 426 350$6.79$ 2,377 $ 490 3,222 AA

Periodic Method FIFO Method Units Activity No of units Unit cost Total Cost Purchases Date 3710 420 6.00 1050 6.08 $ 560 $ 6.40 Less: Sales 01-Apr Beginning Inventory 04-Apr purchase 2,520.00 490 6,384.00 Ending Inventory 3220 3,584.00 08-Apr purchase 13-Apr purchase $ 490 6.60 $ 350 6.79$ 840 $ 6.50 5,460.00 21-Apr purchase 3,234.00 29-Apr purchase 2,376.50 Cost of goods available for sale 23,558.50 Less Ending Inventory 490 units 350 units @ $6.79 $ 2,377 140 units @ $6.6 924 Cost of Ending Inventory 3,301 Cost of goods sold cost of goods available for sale Cost of ending inventory $ 20,258 Note FIFO Method assumes that goods which are purchased first will be sold first SO. Ending inventory consists of units which are purchased last
In Inflationary Period , FIFO Method shows the Highest Net income
Because its cost of goods sold includes the units which are purchased at low cost