Question

Question 1 23 pts Maxell Company uses a periodic inventory system. Consider the following information: Date Description # of units Cost per unit January 1 Beginning inventory 38 $10 June 2 Purchase 180 $12 July 6 Purchase 55 $13 November 5 Sales 165 Calculate the following: 1. Cost of Goods Sold and Ending Inventory using FIFO 2. Cost of Goods Sold and Ending Inventory using LIFO 3. Cost of Goods Sold and Ending Inventory using Weighted Average 4. Which method will result in the lowest NI? why? 5. Why would someone want to use the inventory method that provides the lowest NI? HTML Editore 31 x x B IV A - A - IX E - D V VO 12pt

Answer 1

	Date	units	per unit	total
	1-Jan	38	10	380
	2-Jun	180	12	2160
	6-Jul	55	13	715
		273		3255
1)	FIFO
	Cost of goods sold
	38*10 + (165-38)*12
	1904
	Ending inventory
	1351	(3255-1904)
2)	LIFO
	Cost of goods sold
	55*13+110*12
	2035
	Ending inventory
	3255-2035
	1220
3)	Weighted Average
	Cost of goods sold
	3255/273*165
	1967
	Ending inventory
	3255/273*108
	1288
4)	LIFO method will result in lowest NI as cost of goods sold
	are based on latest purchases resulting in higher rate for cost
	of goods sold
5)	To reduce the tax liability