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Chapter 6: 12SE (page 360)

Question:The periodic inventory records of Flexon Prosthetics indicate the following for the month of July:

Jul. 1 Beginning merchandise inventory 6 units @ \( 60 each

8 Purchase 5 units @ \) 67 each

15 Purchase 10 units @ \( 70 each

26 Purchase 5 units @ \) 85 each

At July 31, Flexon counts four units of merchandise inventory on hand.

Compute ending merchandise inventory and cost of goods sold for Flexon using theLIFO inventory costing method.

Short Answer

Expert verified

Ending Inventory:$240

Cost of goods sold:$1,580

Step by step solution

01

Step-by-Step-SolutionStep1: Computation on ending inventory under periodic inventory FIFO

In LIFO under periodic inventory, the cost of issued inventory is valued at the current prices. So the ending inventory is always valued at historic prices.

So in the given case, the cost of ending inventory would be as follow –

Endinginevntoryvalue=Endinginventory(units)×Costofbeginninginventory=4×$60=$240

02

Computation of cost of goods sold

Costofgoodssold=Openinginventory+TotalPurchase-Endinginventory=6×$60+5×$67+10×$70+5×$85-$240=$360+$1,460-$240=$1,580

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Most popular questions from this chapter

When using a perpetual inventory system and the weighted-average inventory costing method, when does the business compute a new weighted-average cost per unit?

Steel It began January with 55 units of iron inventory that cost \(35 each. During January, the company completed the following inventory transactions:

Units Unit Cost Unit Sales Price

Jan. 3 Sale 45 \) 83

8 Purchase 75 $ 52

21 Sale 70 85

30 Purchase 10 55

Requirements

5. Compute gross profit for January using FIFO, LIFO, and weighted-average inventorycosting methods.

Discuss some measures that should be taken to maintain control over merchandise inventory.

Futuristic Electronic Center began October with 65 units of merchandise inventory that cost \(82 each. During October, the store made the following purchases:

Oct. 3 25 units @ \) 90 each

12 30 units @ \( 90 each

18 35 units @ \) 96 each

Futuristic uses the periodic inventory system, and the physical count at October 31 indicates that 80 units of merchandise inventory are on hand.

Requirements

3. Which method will result in the lowest income taxes for Futuristic? Why? Which method will result in the highest net income for Futuristic? Why?

Question:Boston Cycles started October with 12 bicycles that cost \(42 each. On October 16, Boston bought 40 bicycles at \)68 each. On October 31, Boston sold 34 bicycles for$100 each.

Preparing a perpetual inventory record and journal entries—LIFO

Requirements

2. Journalize the October 16 purchase of merchandise inventory on the account and theOctober 31 sale of merchandise inventory on the account.
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