Craig Company buys and sells one product. Its beginning inventory, purchases, and sales during calendar year 2013
Question:
Craig Company buys and sells one product. Its beginning inventory, purchases, and sales during calendar year 2013 follow:
Additional tracking data for specific identification: (1) January 15 sale—200 units @ $14, (2) April 1 sale—200 units @ $15, and (3) November 1 sale—200 units @ $14 and 100 units @ $20.
Required 1. Calculate the cost of goods available for sale.
2. Apply the four different methods of inventory costing (FIFO, LIFO, weighted average, and specific identi¬ fication) to calculate ending inventory and cost of goods sold under each method using the perpetual system.
3. Compute gross profit earned by the company for each of the four costing methods in part 2. Also, report the inventory amount reported on the balance sheet for each of the four methods.
4. In preparing financial statements for year 2013, the financial officer was instructed to use FIFO but failed to do so and instead computed cost of goods sold according to LIFO, which led to a $1,400 overstatement in cost of goods sold from using LIFO. Determine the impact on year 2013’s income from the error. Also determine the effect of this error on year 2014’s income. Assume no income taxes.
5. Management wants a report that shows how changing from FIFO to another method would change net income. Prepare a table showing (1) the cost of goods sold amount under each of the four methods, (2) the amount by which each cost of goods sold total is different from the FIFO cost of goods sold, and (3) the effect on net income if another method is used instead of FIFO.
Step by Step Answer:
Fundamental Accounting Principles Volume 2
ISBN: 9780077716660
21st Edition
Authors: John Wild, Ken Shaw, Barbara Chiappetta
