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Chapter 6: 17E_1 (page 362)

Question:Golf Unlimited carries an inventory of putters and other golf clubs. The sales price of each putter is \(119. Company records indicate the following for a particular line ofGolf Unlimited’s putters:

Date Item Quantity Unit Cost

Nov. 1 Balance 24 \) 53

6 Sale 20

8 Purchase 30 70

17 Sale 30

30 Sale 2

Requirements

1. Prepare Golf Unlimited’s perpetual inventory record for the putters assumingGolf Unlimited uses the LIFO inventory costing method. Then identify the costof ending inventory and cost of goods sold for the month.

Short Answer

Expert verified

Ending Inventory:$106

COGS:$3,266

Step by step solution

01

Step-by-Step-SolutionStep1: Perpetual Inventory Record using LIFO

DatePurchase/opening
SalesBalance

Units

Cost per unit

Amount

Units

Cost per unit

Amount

Units

Cost per unit

Amount

Nov 1

24

$53

$1,272

24

$53

$1,272

6

20

$53

$1,060

4

$53

$212

8

30

$70

$2,100

4

30

$53

$70

$2,312

17

30

$70

$2,100

4

$53

$212

30

2

$53

$106

2

$53

$106

Total

54

$3,372

52

$3,266

2

$70

$106

02

Ending inventory and COGS

Ending inventory in the perpetual system under the LIFO method is the value of ending inventory at the historical cost and the COGS would be based on current prices. This is so because of the implication of the last in first out method in the allocation of cost to the issued inventory.

In the given case, the ending inventory on 30th Nov amounts to$106 and the COGS for the period amounts to $3,266.

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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.

Preparing a perpetual inventory record and journal entries—LIFO

Requirements

1. Prepare Boston Cycle’s perpetual inventory record assuming the company uses theLIFO inventory costing method.

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

2. State whether each year’s net income—before your corrections—is understated oroverstated, and indicate the amount of the understatement or overstatement.

Steel Mill began August with 50 units of iron inventory that cost \(35 each. During August, the company completed the following inventory transactions:

Units Unit Cost Unit Sales Price

Aug. 3 Sale 45 \) 85

8 Purchase 90 $ 54

21 Sale 85 88

30 Purchase 15 58

Requirements

5. Compute gross profit for August using FIFO, LIFO, and weighted-average inventory costing methods.

Accounting for inventory using the perpetual inventory system—

FIFO, LIFO, and weighted-average, and comparing FIFO, LIFO, and weighted-average Steel Mill began August with 50 units of iron inventory that cost \(35 each. During August, the company completed the following inventory transactions:

Units Unit Cost Unit Sales Price

Aug. 3 Sale 45 \) 85

8 Purchase 90 $ 54

21 Sale 85 88

30 Purchase 15 58

Requirements

4. Determine the company’s cost of goods sold for August using FIFO, LIFO, and weighted-average inventory costing methods.

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?
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