LIFO liquidation in an interim reporting period Assume that our records include the following two LIFO...
LIFO liquidation in an interim reporting period
Assume that our records include the following two LIFO inventory cost pools:
| Units | Cost/Unit | |
|---|---|---|
| BOQ | 960 | $25 |
| Purchase #1 | 1,280 | $35 |
| 2,240 |
At the beginning of the quarter (BOQ), we report 960 units on hand
at a cost of $25 per unit. During the quarter, we sell 1,600 units
at $60/unit for cash. Assume that we expect to increase our
quantities of inventories on hand by year-end by the purchase of
inventories at a cost of $40.
a. Compute the gross profit we should recognize on the sales during the quarter.
Gross Profit $Answer
b. Prepare the required journal entries to record the sales.
| General Journal | ||
|---|---|---|
| Description | Debit | Credit |
| AnswerCashInventoryExcess of replacement cost over LIFO costSalesCost of goods sold | Answer | Answer |
| AnswerCashInventoryExcess of replacement cost over LIFO costSalesCost of goods sold | Answer | Answer |
| AnswerCashInventoryExcess of replacement cost over LIFO costSalesCost of goods sold | Answer | Answer |
| Inventory | Answer | Answer |
| AnswerCashInventoryExcess of replacement cost over LIFO costSalesCost of goods sold | Answer | Answer |
Homework Answers
1.
| Sales | 1600*60 | 96000 |
| COGS | 1280*35+320*40 | 57600 |
| Gross profit | 38400 |
2.
| Cash a/c Dr | 96000 | |
| To Sales a/c | 96000 | |
| (Sales Recorded) | ||
| Cost of Goods Sold a/c Dr | 57600 | |
| To Inventory a/c (1280*35 + 320*25) | 52800 | |
| To Excess of Replacement cost over LIFO Cost (40-25)*320 | 4800 |
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LIFO liquidation in an interim reporting
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GIVEN INFORMATION!
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