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FIFO and LIFO

Cost-flow assumptions-FIFO and LIFO using periodic and perpetual systems.
The inventory records of Cushing, Inc., reflected the following information for the year ended
December 31, 2004:

Number of Units Cost Total Cost
Inventory, January 1 100 $13 $1,300
PURCHASES:
May 30 160 15 2,400

September 28 200 16 3,200

Goods available for sale 460 $6,900

Sales:
February 22 (70)
June 11 (150)
November 1 (190)
Inventory, December 31 50

Required:

a. Assume that Cushing, Inc., uses a periodic inventory system. Calculate cost of goods sold and ending inventory under FIFO and LIFO.

b. Assume that Cushing, Inc., uses a perpetual inventory system. Calculate cost of goods sold and ending inventory under FIFO and LIFO.

c. Explain why the FIFO results for cost of goods sold and ending inventory are the same in your answers to parts a and b, but the LIFO results are different.

d. Explain why the results from the LIFO periodic calculations in part a cannot possibly represent the actual physical flow of inventory items.

Solution Summary

FIFO and LIFO are studied.

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