Question

Wine company as the number or purchases ane se troughout escn accounting penge Duplessinventory couting method at the end of each period, as a periodic inventory system. Assumes accounting records provided the following information at the end of the annual accounting period. December 31 TELOR Seg DR Coat . J y he T 2.430 15 Assuming that for Specific identification method temd the March 14 sale was selected to the from the beginning inventory and three-ths from the purchase of January 30. Assume that the sale of August 31 was selected from the remainder of the beginning Inventory with the balance from the purchase of Mayt Required: 1 Compute the amount of goods available for sale, ending Inventory, and cost of goods sold at December 31 under each of the following inventory coating methods: Round Intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.) Amount of Goods Available Ending Inventory Cost of Goods Bold We ed average cost 2-o. Of the four methods, which will result in the highest gross profite? Last-in, first-out Weighted average cost Pirstin, first-out Specific identification 2-b. Of the four methods, which will result in the lowest income taxes! Lasten, fotout Weighted average cost

Answer 1

Solution 1:

Computation of COGS and ending inventory - Periodic LIFO
Particulars	Cost of goods available for sale			Cost of goods sold			Ending Inventory
	Nos of units	Unit Cost	Cost of goods available for sale	Nos of units sold	Unit Cost	Cost of goods sold	Nos of units in ending inventory	Unit Cost	Ending inventory
Beginning inventory	1700	$65.00	$110,500	0	$65.00	$0.00	1700	$65.00	$110,500.00
Purchases:
30-Jan	2750	$75.00	$206,250	1400	$75.00	$105,000.00	1350	$75.00	$101,250.00
1-May	1450	$95.00	$137,750	1450	$95.00	$137,750.00	0	$95.00	$0.00
Total	5900		$454,500	2850		$242,750.00	3050		$211,750.00

Computation of COGS and ending inventory - Periodic Weighted Average cost method
Particulars	Cost of goods available for sale			Cost of goods sold - Average cost			Ending Inventory - Average cost
	Nos of units	Unit Cost	Cost of goods available for sale	Nos of units sold	Unit Cost	Cost of goods sold	Nos of units in ending inventory	Unit Cost	Ending inventory
Beginning inventory	1700	$65.00	$110,500
Purchases:
30-Jan	2750	$75.00	$206,250
1-May	1450	$95.00	$137,750
Total	5900	$77.03	$454,500	2850	$77.03	$219,547	3050	$77.03	$234,953

Computation of COGS and ending inventory - Periodic FIFO
Particulars	Cost of goods available for sale			Cost of goods sold			Ending Inventory
	Nos of units	Unit Cost	Cost of goods available for sale	Nos of units sold	Unit Cost	Cost of goods sold	Nos of units in ending inventory	Unit Cost	Ending inventory
Beginning inventory	1700	$65.00	$110,500	1700	$65.00	$110,500.00	0	$65.00	$0.00
Purchases:
30-Jan	2750	$75.00	$206,250	1150	$75.00	$86,250.00	1600	$75.00	$120,000.00
1-May	1450	$95.00	$137,750	0	$95.00	$0.00	1450	$95.00	$137,750.00
Total	5900		$454,500	2850		$196,750.00	3050		$257,750.00

Computation of COGS and ending inventory - Specific Identification
Particulars	Cost of goods available for sale			Cost of goods sold			Ending Inventory
	Nos of units	Unit Cost	Cost of goods available for sale	Nos of units sold	Unit Cost	Cost of goods sold	Nos of units in ending inventory	Unit Cost	Ending inventory
Beginning inventory	1700	$65.00	$110,500	1700	$65.00	$110,500.00	0	$65.00	$0.00
Purchases:
30-Jan	2750	$75.00	$206,250	810	$75.00	$60,750.00	1940	$75.00	$145,500.00
1-May	1450	$95.00	$137,750	340	$95.00	$32,300.00	1110	$95.00	$105,450.00
Total	5900		$454,500	2850		$203,550.00	3050		$250,950.00

Solution 2a:

FIFO method results in highest gross profit

Solution 2b:

LIFO will result in lowest income taxes.