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Chapter 6: 15E_2 (page 361)

Question:Super Mart, a regional convenience store chain, maintains milk inventory by the gallon.

The first month’s milk purchases and sales at its Freeport, Florida, location follow:

Nov. 2 Purchased 11 gallons @ \(2.15 each

6 Purchased 2 gallons @ \)2.80 each

8 Sold 6 gallons of milk to a customer

13 Purchased 3 gallons @ $2.85 each

14 Sold 4 gallons of milk to a customer

Requirements

2. Determine the amount that would be reported in ending merchandise inventoryon November 15 using the LIFO inventory costing method

Short Answer

Expert verified

The ending inventory on Nov.15 amounts to$12.9

Step by step solution

01

Step-by-Step-SolutionStep1: Perpetual Inventory LIFO Method

The Perpetual Inventory method is a system of maintaining inventory records continuously after every purchase and sale. LIFO is a method of allocating cost based on issuing assumption of last in first out.

So perpetual inventory under the LIFO method maintains the continuous record of inventory based on the last in first out assumption.

02

Calculation of ending inventory

Date

Purchase/opening

Sales

Balance

Units

Cost per unit

Amount

Units

Cost per unit

Amount

Units

Cost per unit

Amount

Nov 2

11

$2.15

$23.65

11

$2.15

$23.65

6

2

$2.80

$5.6

11

2

$2.15

$2.80

$29.25

8

2

4

$2.80

$2.15

$14.2

7

$2.15

$15.05

13

3

$2.85

$8.55

7

3

$2.15

$2.85

$23.6

14

3

1

$2.85

$2.15

$10.7

6

$2.15

$12.9

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Most popular questions from this chapter

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.

Requirements

1. Prepare Boston Cycle’s perpetual inventory record assuming the company usesthe specific identification inventory costing method. Assume that Boston sold 10bicycles that cost \)42 each and 24 bicycles that cost $68 each.

Question:Empire State Carpets’s books show the following data. In early 2020, auditors foundthat the ending merchandise inventory for 2017 was understated by \(8,000 and thatthe ending merchandise inventory for 2019 was overstated by \)9,000. The ending merchandiseinventory at December 31, 2018, was correct.

2019

2018

2017

Net Sales Revenue

\( 220,000

\) 162,000

\( 176,000

Cost of Goods Sold:

Beginning Merchandise Inventory

\)22,000

\(29,000

\)46,000

Net cost of purchase

132,000

90,000

76,000

Cost of goods available for sale

154,000

119,000

122,000

Less: Ending Merchandise Inventory

32,000

22,000

29,000

Cost of goods sold

122,000

97,000

93,000

Gross Profit

98,000

65,000

83,000

Operating Expenses

72,000

38,000

48,000

Net Income

\( 26,000

\) 27,000

$ 35,000

Requirements

1. Prepare corrected income statements for the three years.

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.

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

1. Determine the ending merchandise inventory and cost of goods sold amounts for the October financial statements using the FIFO, LIFO, and weighted-average inventory costing methods.

Question:Assume that Toys Galore store bought and sold a line of dolls during December as follows:

Dec. 1 Beginning merchandise inventory 13 units @ \( 9 each

8 Sale 8 units @ \) 22 each

14 Purchase 16 units @ \( 14 each

21 Sale 14 units @ \) 22 each

Requirements

5. Which method results in a higher gross profit?
See all solutions

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