LIFO and FIFO method. XYZ Company - periodic inventory
Not what you're looking for?
XYZ Company uses the periodic inventory method and had the following inventory information available:
Units Unit Cost Total Cost
1/1 Beginning Inventory 100 $4 $ 400
1/20 Purchase 400 $5 2,000
7/25 Purchase 300 $6 1,800
10/20 Purchase 200 $7 1,400
1,000 $5,600
A physical count of inventory on December 31 revealed that there were 300 units on hand.
Instructions
Answer the following independent questions and show computations supporting your answers.
1. Assume that the company uses the FIFO method. The value of the ending inventory at December 31 is $__________.
2. Assume that the company uses the Average Cost method. The value of the ending inventory on December 31 is $__________.
3. Assume that the company uses the LIFO method. The value of the ending inventory on December 31 is $__________.
4. Determine the difference in the amount of income that the company would have reported if it had used the FIFO method instead of the LIFO method. Would income have been greater or less?
Purchase this Solution
Solution Summary
A sentence or two with each computation so you can learn the logic and rules.
Solution Preview
Question 1
If the company is using FIFO, it is assumed that the sales come from the first purchases (in chronological order).
Let's calculate the exact values. The firm had 1,000 units of the good, counting the beginning inventory and the purchases. The inventory at the end of the year showed that there were 300 units left. Therefore, the firm sold 700 units during the year. Now, under the FIFO method, these units have to come from the earliest possible purchases.
- Beginning inventory: 100 units
- First purchase: 400 units (total = 500 units - not enough to cover the 700 units)
- Second purchase: 300 units (total = 800 units - now it's enough)
Therefore, using this method, the firm assumes it ...
Purchase this Solution
Free BrainMass Quizzes
Accounting: Statement of Cash flows
This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.
Marketing Research and Forecasting
The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.
Business Ethics Awareness Strategy
This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.
Social Media: Pinterest
This quiz introduces basic concepts of Pinterest social media
Organizational Behavior (OB)
The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.