1 answer

(10 points) During June, the following changes in inventory item 28 took place: 5,000 units @...

Question:

(10 points) During June, the following changes in inventory item 28 took place: 5,000 units @ S21 1,500 units @ $45 2,000 uni
(10 points) During June, the following changes in inventory item 28 took place: 5,000 units @ S21 1,500 units @ $45 2,000 units @ $50 1,000 units @ $25 1,000 units @ $22 3,000 units @ $52 Balance 8 Sold 10 Sold 14 Purchased 24 Purchased June 1 29 Sold Perpetual inventories are maintained. (6 points) What is the cost of the ending inventory and cost of goods sold for item 27 under LIFO and under FIFO? a. (4 points) Record the journal entry for the sale on the 29th assuming LIFO and a 5% sales tax. b.

Answers

Solution

(a)

Under FIFO Method, the valuation would be as follows,

Date Particulars Purchase/Sales Balance
Units Rate Cost Value Selling Rate Sales Value Units Rate Value
Jun-01 Opening Balance 5000 $ 21.00 $ 1,05,000.00
Jun-08 Sales 1500 $                 21.00 $ 31,500.00 $          45.00 $     67,500.00 -1500 $ 21.00 $   -31,500.00
3500 $ 21.00 $     73,500.00
Jun-10 Sales 2000 $                 21.00 $ 42,000.00 $          50.00 $ 1,00,000.00 -2000 $ 21.00 $   -42,000.00
1500 $ 21.00 $     31,500.00
Jun-14 Purchases 1000 $                 25.00 $ 25,000.00 1000 $ 25.00 $     25,000.00
2500 $        -   $     56,500.00
Jun-24 Purchases 1000 $                 22.00 $ 22,000.00 1000 $ 22.00 $     22,000.00
3500 $        -   $     78,500.00
Jun-29 Sales 3000 (1500 x $ 21.00) $ 31,500.00
(1000 x $ 25.00) $ 25,000.00
(500 x $ 22.00) $ 11,000.00
$ 67,500.00 $          52.00 $ 1,56,000.00 -3000 $        -   $   -67,500.00
Closing Balance 500 $        -   $     11,000.00

Therefore,

Closing Balance of Inventory (500 units) = $ 11,000.00

and, Cost of Goods Sold = $ (31,500 + 42,000 + 67,500) = $ 141,000

Under LIFO Basis,

Date Particulars Purchase/Sales Balance
Units Rate Cost Value Selling Rate Sales Value Units Rate Value
Jun-01 Opening Balance 5000 $ 21.00 $ 1,05,000.00
Jun-08 Sales 1500 $                 21.00 $ 31,500.00 $          45.00 $     67,500.00 -1500 $ 21.00 $   -31,500.00
3500 $ 21.00 $     73,500.00
Jun-10 Sales 2000 $                 21.00 $ 42,000.00 $          50.00 $ 1,00,000.00 -2000 $ 21.00 $   -42,000.00
1500 $ 21.00 $     31,500.00
Jun-14 Purchases 1000 $                 25.00 $ 25,000.00 1000 $ 25.00 $     25,000.00
2500 $        -   $     56,500.00
Jun-24 Purchases 1000 $                 22.00 $ 22,000.00 1000 $ 22.00 $     22,000.00
3500 $        -   $     78,500.00
Jun-29 Sales 3000 (1000 X $ 22.00) $ 22,000.00
(1000 x $ 25.00) $ 25,000.00
(1000 x $ 21.00) $ 21,000.00
$ 68,000.00 $          52.00 $ 1,56,000.00 -3000 $        -   $   -68,000.00
Closing Balance 500 $        -   $     10,500.00

Therefore,

Closing Balance of Inventory (500 units) = $ 10,500.00

and, Cost of Goods Sold = $ (31,500 + 42,000 + 68,000) = $ 141,500

(b)

Assuming the sales made for cash under LIFO basis,

Cash A/c .................... Dr. 156,000
To, Sales A/c 156,000

Sales A/c ................... Dr. 156,000
To, Cost of Goods Sold A/c 68,000
To, Profit and Loss A/c
(156,000 - 141,500) 14,500

Sales Tax A/c .............

Dr.
(156,000 x 5%) 7,800
To, Cash A/c 7,800

Profit and Loss A/c ..... Dr. 7,800
To, Sales Tax A/c 7,800

.

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