Intro to Accounting for HionMajors 7 Gradebook ORION CALCULA

Intro to Accounting for Hion-Majors 7 Gradebook ORION CALCULATOR TOR FULL SCREENPRINTER VERSTOW(BACK rlef Exercise 6-5 Your answer is incorrect. Try again. n its first month of operation, Kuhlman Company purchased 260 units of inventory for $9, then 360 units for $10, and finally 300 units for $11. At the end of the month, 330 units remained. Compute the amount of phantom profit that would result if the company used FIFO rather than LIFO. Phantom profit Question Attempts: 1 of 3 used SAVE FOR LATER SUBMIT ANSEn lRights Reserved. A Division of MacBook Air

Solution

CALCULATION OF COST OF GOODS SOLD UNDER FIFO METHOD ND LIFO METHOD Purchases Date Particulars Units (A) Rate Per unit Total Cost Purchases Purchases in First Month 260 $9 $2,340 Purchases in Second Month 360 $10 $3,600 Purchases in Third Month 300 $11 $3,300 Total Goods Available for Sale 920 9240 Closing Stock 330 So, Cost of Goods Sold under FIFO methd will be as below, Purchases in First Month 260 $9 $2,340 Purchases in Second Month 330 $10 $3,300 Total (A) 590 $5,640 So, Cost of Goods Sold under LIFO methd will be as below, Sales From Purchases in Third Month 300 $11 $3,300 Purchases in Second Month 290 $10 $2,900 Total (B) 590 $6,200 So difference of Total ( B )- Total (A) = $ 6,200 - $ 5640 = $560 Answer = If we used the FIFO rather than LIFO than profit will be excess by $ 560