Question

Exercise 8-11 Sunland Company’s record of transactions for the month of April was as follows. Purchases Sales April 1 (balance on hand) 1,020 @ $6.00 April 3 850 @ $10.00 4 2,550 @ 6.08 9 2,380 @ 10.00 8 1,360 @ 6.40 11 1,020 @ 11.00 13 2,040 @ 6.50 23 2,040 @ 11.00 21 1,190 @ 6.60 27 1,530 @ 12.00 29 850 @ 6.79 7,820 9,010

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?     FIFO    LIFO    Average-cost     _____ inventory method will show the highest net income.

Answer 1

Correct Answer:

Requirement 1: Average cost per unit = $ 6.35

Weighted Average Cost Per unit
Units		(A)	9010
Total Cost		(B)	$            57,213.50
Average Cost		(C=B/A)	$                       6.35

Requirement 2:

	LIFO	Weighted Average
Ending Inventory	$ 7,154	$ 7,557

Working:

	Periodic LIFO
A	Total Units Available for sale			9010		$    57,213.50
	Units Sold			7820
	Ending Inventory Units			1190
	Valuation
	Cost of Goods Sold		850		$                           6.79	5,771.50
			1190		$                           6.60	7,854.00
			2040		$                           6.50	13,260.00
			1360.00		$                           6.40	8,704.00
			2380.00		$                           6.08	14,470.40
						-
B	Cost of Goods Sold		7820	units		$    50,059.90
A-B	Ending Inventory		1190	units		$      7,153.60

	Weighted Average
A	Total Units Available for sale			9010		$    57,213.50
	Units Sold			7820
	Ending Inventory Units			1190
	Valuation
	Cost of Goods Sold		7820		$                       6.3500	$    49,657.00
B	Cost of Goods Sold		7820	units		$          49,657
A-B	Ending Inventory		1190	units		$            7,557

Requirement 3:

	FIFO	LIFO
Ending Inventory	$ 8,016	$ 10,001

Working:

Perpetua; FIFO
A	Total Units Available for sale			9010		$    57,213.50
	Units Sold			7820
	Ending Inventory Units			1190
	Valuation
	Cost of Goods Sold		1020		$                           6.00	$      6,120.00
			2550		$                           6.08	$    15,504.00
			1360		$                           6.40	$      8,704.00
			2040		$                           6.50	$    13,260.00
			850		$                           6.60	$      5,610.00
B	Cost of Goods Sold		7820	units		$    49,198.00
A-B	Ending Inventory		1190	units		$      8,015.50

	LIFO
A	Total Units Available for sale			9010		$    57,213.50
	Units Sold			7820
	Ending Inventory Units			1190
	Valuation
	Cost of Goods Sold		850		$                           6.00	5,100.00
			2380		$                           6.08	14,470.40
			1020		$                           6.40	6,528.00
			2040.00		$                           6.50	13,260.00
			1190.00		$                           6.60	7,854.00
			340.00		$                           6.40	2,176.00
B	Cost of Goods Sold		7820	units		$    47,212.40
A-B	Ending Inventory		1190	units		$    10,001.10

Requirement 4:

	FIFO
Cost of Goods Sold	$                  49,198

Note: FIFO inventory system under Periodic and perpetual remains the same, viz cost of goods sold and ending inventory do not changes.

Requirement 5:

In an inflationary situation FIFO inventory system will show the highest net income.

End of answer.

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