Homework SourseAlta Ski Companys inventory records contained the following
Alta Ski Company\'s inventory records contained the following information regarding its latest ski model. The company uses a periodic inventory system.
Required:
1a. Which method, FIFO or LIFO, will result in the highest cost of goods sold figure for January 2018?
1b. Which method will result in the highest ending inventory balance?
2. Compute cost of goods sold for January and the ending inventory using both the FIFO and LIFO methods.
| Beginning inventory, January 1, 2018 | 900 | units @ $100 each |
| Purchases: | ||
| January 15 | 1,900 | units @ $115 each |
| January 21 | 1,700 | units @ $120 each |
| Sales: | ||
| January 5 | 850 | units @ $140 each |
| January 22 | 1,250 | units @ $150 each |
| January 29 | 700 | units @ $155 each |
| Ending inventory, January 31, 2018 | 1,700 | units |
Solution
1a. In case of rising cost, the method that will result in the highest cost of goods sold figure for January 2018 is LIFO.
1b. In case of rising cost, the method that will result in the highest ending inventory balance is FIFO.
Part 2
FIFO
Cost of goods sold = (900*100)+(1900*115)=308500
Ending inventory = (1700*120)=204000
LIFO
Cost of goods sold = (1700*120)+(1100*115)=330500
Ending inventory = (900*100)+(800*115) = 182000
