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# Compute the cost of ending inventory using FIFO, LIFO, weigh

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The inventory record for Item S9 reveals the following for Year 4. The firm uses a periodic inventory system.

Units Per Unit Cost Total
Inventory, January 1, Year 4 1,800 1.60 2,880
Purchases:
February 18 600 1.68 1,008
May 2 900 1.72 1,548
July 26 1,500 1.80 2,700
September 29 1,200 1.84 2,208
December 3 1,800 1.88 3,384
Total purchases 6,000 \$10,848
Total available for sale 7,800 \$13,728
Less inventory, December 31, Year 4 (2,400) ?
Units sold during Year 4 5,400 ?

Required:

a. Compute the cost of ending inventory assuming that a FIFO cost-flow assumption is used.
b. Compute the cost of ending inventory assuming that a LIFO cost-flow assumption is used.
c. Compute the cost of ending inventory assuming that a weighted-average cost-flow assumption is used.

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#### Solution Preview

The inventory record for Item S9 reveals the following for Year 4. The firm uses a periodic inventory system.

Units Per Unit Cost Total

Inventory, January 1, Year 4 1,800 1.60 2,880

Purchases:
February 18 600 1.68 1,008
May 2 900 1.72 1,548
July 26 1,500 1.80 2,700
September 29 1,200 1.84 2,208
December 3 1,800 1.88 3,384 ...

#### Solution Summary

This solution is comprised of a detailed explanation to compute the cost of ending inventory assuming that a FIFO cost-flow assumption is used.

\$2.19

## Balance Sheet Analysis

Obtain the latest annual report and accounts of a company of your choice.* Consult the Balance Sheet and determine the company's net asset value.

· What is the composition of the assets, i.e. the relative size of fixed and current assets?
· What is the relative size of intangible fixed and tangible fixed assets?
· What proportion of current assets is accounted for by stocks and debtors?
· What is the company's policy towards asset revaluation?
· What is its depreciation policy?

Now consult the financial press to assess the market value of the equity. This is the current share price times the number of ordinary shares issued. (The notes to the accounts will indicate the number of shares issued.)

· What difference do you find between the net asset value and the market value?
· How can you explain this?
· What is the P:E ratio of your selected company?
· How does this compare with other companies in the same sector?
· How can you explain any differences?
· Do you think your selected company's shares are under- or over-valued?

Notes:
You chosen company MUST have a full listing on the London Stock Exchange.

You MUST attach to your coursework a copy of the latest annual report and accounts of your chosen company. (This does not contribute towards the word count.)

Your coursework should be no less than 1500 words and no more than 2500.
Ratio analysis as well as company valuation methods are required, along with a critical appraisal of the techniques used.

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