Share
Explore BrainMass

a small lawn mower business

The following transactions were incurred concerning a small lawn mower business during April:

April 1 Beginning Inventory 15 mowers @$110 per mower

April 5 Purchased 20 mowers @ $115 per mower

April 12 Sold 20 @ $160 per mower

April 20 Purchased 10 mowers @ $120 per mower

April 28 Sold 16 @ $160 per mower

1. 1. Compute the ending inventory and cost of sales for April assuming the use of the periodic inventory system and the

a. Average Cost Method

b. FIFO Method

c. LIFO Method

2. 2. Compute the ending inventory and cost of sales for April assuming the use of the perpetual inventory system and the

d. Average Cost Method

e. FIFO Method

f. LIFO Method

3. List an advantage and disadvantage of the periodic inventory system.
. 4. List an advantage and disadvantage of the perpetual inventory system.

Solution Preview

See the attached file.

LIFO/FIFO
The following transactions were incurred concerning a small lawn mower business during April:

April 1 Beginning Inventory 15 mowers @$110 per mower

April 5 Purchased 20 mowers @ $115 per mower

April 12 Sold 20 @ $160 per mower

April 20 Purchased 10 mowers @ $120 per mower

April 28 Sold 16 @ $160 per mower

1. Compute the ending inventory and cost of sales for April assuming the use of the periodic inventory system and the

a. Average Cost Method

Quantity of ending inventory
= Beginning inventory + Units purchased - Units sold
= 15 + 30 - 36 = 9 units

Weighted average cost per unit
= (15x$110 + 20x$115 + 10x$120) / (15+20+10)
= ($1,650 + $2,300 + $1,200) / 45
= $5,150 / 45 = $114.44

Cost of goods sold
= (20 + 16) x $114.44
= 36 x $114.44 = $4,119.84

Cost of ending inventory
= 9 x $114.44 = $1,029.96
b. FIFO Method
FIFO Ending Inventory - The last 9 units
April 20 Purchase (9 units x $120) 1,080

FIFO Cost of Sales - The first 36 units
April 1 Beginning Inventory 15 mowers @$110 per mower 1,650

April 5 Purchased 20 mowers @ $115 per mower 2,300

April 20 Purchased 1 mower @ $120 per mower 120
FIFO Cost of Goods Sold 4,070

c. LIFO ...

Solution Summary

This solution is comprised of a detailed explanation to compute the ending inventory and cost of sales for April assuming the use of the periodic inventory system and the

a. Average Cost Method
b. FIFO Method
c. LIFO Method.

$2.19