Classic Distribution markets CDs of numerous performing artists. At the beginning of March, Classic had in beginning inventory 1,500 CDs with a unit cost of $7. During March Classic made the following purchases of CDs.

March 21 March 26 6,000 @ $10 2,000 @ $11 March 5 March 13 2,000 @ $8 5,500 @ $9 During March 13,000 units were sold. Classic uses a periodic inventory system.

Instructions

(a) Determine the cost of goods available for 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 method results in (1) the highest inventory amount for the balance sheet and (2) the highest cost of goods sold for the income statement?

Problems: Set A 301 Determine items and amounts to be recorded in inventory.

(SO 1)

Determine cost of goods sold and ending inventory using FIFO, LIFO, and average cost, with analysis.

(SO 2, 3)

Cost of goods sold:

FIFO $116,000 LIFO $127,000 Average $120,824 302 Determine cost of goods sold and ending inventory using FIFO, LIFO, and average cost in a periodic inventory system, and assess financial statement effect.

(SO 2, 3)

Cost of goods sold:

FIFO $17,000 UFO $18,200 Average $17,591 Compute ending inventory, prepare income statements, and answer questions using FIFO and LIFO.

(SO 2, 3)

CEE Gross profit:

FIFO $351,000 LIFO $324,000 poppe Calculate ending inventory, cost of goods sold, gross profit, and gross profit rate under periodic method;

compare results.

(SO 2, 3)

Gross profit:

LIFO $2,890 FIFO $3,150 Average $3,036 CHAPTER 6 Reporting and Analyzing Inventory