p6.2a determine cost of goods sold and ending inventory using fifo, lifo, and average - cost with analysis…

p6.2a determine cost of goods sold and ending inventory using fifo, lifo, and average - cost with analysis mullins distribution markets cds of numerous performing artists. at the beginning of march, mullins had in beginning inventory 2,500 cds with a unit cost of $7. during march, mullins made the following purchases of cds. march 5 2,000 @ $8 march 21 5,000 @ $10 march 13 3,500 @ $9 march 26 2,000 @ $11 during march 12,000 units were sold. mullins uses a periodic inventory system. instructions (a) determine the cost of goods available of sale. (b) determine (1) the ending inventory and (2) the cost of goods sold under each of the assumed cost flow methods (fifo, lifo, and average - cost). prove the accuracy of the cost of goods sold under the fifo and lifo methods. (note: for average - cost, round cost per unit to three decimal places.) (c ) which cost flow methods results in (1) the highest inventory amount for the balance sheet and (2) the highest cost of goods sold for the income statement? note: enter a number in cells requesting a value; enter either a number or a formula in cells with a \?\. enter a textual answer in the cells with \text.\

p6.2a determine cost of goods sold and ending inventory using fifo, lifo, and average - cost with analysis mullins distribution markets cds of numerous performing artists. at the beginning of march, mullins had in beginning inventory 2,500 cds with a unit cost of $7. during march, mullins made the following purchases of cds. march 5 2,000 @ $8 march 21 5,000 @ $10 march 13 3,500 @ $9 march 26 2,000 @ $11 during march 12,000 units were sold. mullins uses a periodic inventory system. instructions (a) determine the cost of goods available of sale. (b) determine (1) the ending inventory and (2) the cost of goods sold under each of the assumed cost flow methods (fifo, lifo, and average - cost). prove the accuracy of the cost of goods sold under the fifo and lifo methods. (note: for average - cost, round cost per unit to three decimal places.) (c ) which cost flow methods results in (1) the highest inventory amount for the balance sheet and (2) the highest cost of goods sold for the income statement? note: enter a number in cells requesting a value; enter either a number or a formula in cells with a \?\. enter a textual answer in the cells with \text.\

Answer

Explanation:

Step1: Calculate cost of goods available for sale

Beginning inventory: $2500\times7 = 17500$ Purchases: March 5: $2000\times8=16000$ March 13: $3500\times9 = 31500$ March 21: $5000\times10=50000$ March 26: $2000\times11 = 22000$ Cost of goods available for sale=$17500 + 16000+31500+50000+22000=137000$

Step2: Calculate number of units available for sale and ending - inventory units

Number of units available for sale=$2500 + 2000+3500+5000+2000=15000$ Ending - inventory units=$15000 - 12000 = 3000$

Step3: FIFO method

Ending inventory

Take the most recent purchases. $2000\times11+1000\times10=22000 + 10000=32000$

Cost of goods sold

Cost of goods available for sale - Ending inventory=$137000-32000 = 105000$

Step4: LIFO method

Ending inventory

Take the earliest purchases. $2500\times7+500\times8=17500+4000 = 21500$

Cost of goods sold

Cost of goods available for sale - Ending inventory=$137000 - 21500=115500$

Step5: Average - cost method

Average cost per unit=$\frac{137000}{15000}\approx9.133$

Ending inventory

$3000\times9.133 = 27399$

Cost of goods sold

$12000\times9.133=109596$

Step6: Answer part (c)

(1) FIFO results in the highest inventory amount for the balance - sheet ($32000$). (2) LIFO results in the highest cost of goods sold for the income statement ($115500$).

Answer:

(a) Cost of goods available for sale: $137000$ (b)(1) FIFO ending inventory: $32000$ LIFO ending inventory: $21500$ Average - cost ending inventory: $27399$ (b)(2) FIFO cost of goods sold: $105000$ LIFO cost of goods sold: $115500$ Average - cost cost of goods sold: $109596$ (c)(1) FIFO (c)(2) LIFO