Swanson, Inc. uses a periodic inventory system. From the following details, calculate the cost of goods sold. Beginning merchandise inventory $2,000 Ending merchandise inventory 2, 400 Purchases 20,000 Purchase Discounts 900 Purchase Returns and Allowances 1, 200 Freight In 4.400 $17, 900 $24, 300 $22, 100 $21, 900
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a.) Given the following information about purchases and salesduring the year, compute the cost to be assigned to endinginventory under each of three methods: (a) average-cost, (b) FIFO,and (c) LIFO. (Show your work.)
Assume that a periodic inventory system is used.
Jan. | 1 | Beginning inventory | 225 items @ $3 = | $ 675 | |
May | 1 | Purchases | 675 items @ $6 = | 4,050 | |
Totals | 900 items | $4,725 | |||
Total sales | 450 items | ||||
Dec. | 31 | Ending inventory | 450 items |
b.) Assuming a perpetual inventory system is used, use thefollowing information to calculate cost of goods sold on anaverage-cost basis.
Dec. | 1 | Beginning inventory | 50 units @ $22 | |
9 | Purchases | 50 units @ $24 | ||
17 | Sales | 25 units | ||
22 | Purchases | 75 units @ $27 | ||
27 | Sales | 40 units |
| Periodic Inventory Method | |||||||||
| Better Bottles, Inc. uses a PERIODIC inventory system and has the following information available: | |||||||||
| Description | # of Units | Cost per Unit | Total Cost | ||||||
| Beginning inventory | 20 | $20.00 | $400 | ||||||
| Jan 5 sold | 15 | ||||||||
| Jan 15 purchase | 27 | $22.00 | 594 | ||||||
| Jan 18 sold | 21 | ||||||||
| Jan 20 purchase | 33 | $30.00 | 990 | ||||||
| Total goods available for sale | 80 | $1,984 | |||||||
| Total goods sold | 36 | ||||||||
| Required: | |||||||||
| 1 | Calculate both Cost of goods sold and Ending inventory using the Periodic FIFO Method. | ||||||||
| 2 | Calculate both Cost of good sold and Ending Inventory using Periodic LIFO Method. | ||||||||
| 3 | Use your calculations from 1-2 and complete the Income Statement. | ||||||||
| The company income tax rate: | 0.25 | ||||||||
| 1 | FIFO Cost of Goods Sold - PERIODIC | ||||||||
| Units Sold Taken From: | # of Units | Cost per Unit | Total Cost | ||||||
| Total Cost of Goods Sold FIFO | |||||||||
| FIFO Ending Inventory - PERIODIC | |||||||||
| Inventory Available | # of Units | Cost per Unit | Total Cost | ||||||
| Beginning inventory | |||||||||
| +Purchase | |||||||||
| +Purchase | |||||||||
| (Less Cost of Goods Sold) | |||||||||
| Ending Inventory FIFO | |||||||||
| 2 | LIFO Cost of Goods Sold - PERIODIC | ||||||||
| Units Sold Taken From: | # of Units | Cost per Unit | Total Cost | ||||||
| Total Cost of Goods Sold LIFO | |||||||||
| LIFO Ending Inventory - PERIODIC | |||||||||
| Inventory Available | # of Units | Cost per Unit | Total Cost | ||||||
| Beginning inventory | |||||||||
| +Purchase | |||||||||
| +Purchase | |||||||||
| (Less Cost of Goods Sold) | |||||||||
| Ending Inventory LIFO | |||||||||
| 3 | Income Statement - Periodic Inventory Method | ||||||||
| FIFO | LIFO | ||||||||
| Sales revenue, net | 25,000 | 25,000 | |||||||
| Cost of goods sold | |||||||||
| Gross profit | |||||||||
| Operating expenses | 8,000 | 8,000 | |||||||
| Operating income before tax | |||||||||
| Income tax expense | |||||||||
| Net income | |||||||||
