33 Project #6: Inventory Valuation Fido, the owner's dog, ate some papers! Later, it was discovered that those were accounting records for the perpetual inventory system. Because the dog ate the records for the perpetual method, they have to resort to using a periodic method of inventory costing. A physical count showed 835 bags remaining in inventory. Required: Calculate cost of good available for sale. 1. Compute ending inventory and cost of goods sold using the FIFO method of inventory. 2. 3. Compute ending inventory and cost of goods sold using the LIFO method of inventory. 4. Prepare T-Accounts showing your method of choice. 5. Prepare a new Adjusted Trial Balance using the inventory method that provides the highest cost of goods sold and highlight the accounts and amounts changed. Lifo cosistant 6. Write a full sentence statement explaining why the accountant would recommend using the inventory method that results in the highest cost of goods sold. 7. Complete a partial Multistep Income Statement up through Gross Margin. (NOTE: This is an expanded format. See examples.) FIFO LIFO Last In, First Out First In, First Out STORAGE STORAGE O astephan/Sharterstock.com OatephanShumentock.com Income Statement (multi-step) Revenue Less: Cost of Goods Sold Gross Margin (Gross Margin shows how effective management is at buying and selling its Sules cost 2-cos products or services). Less: Operating Expenses Net Income From Operations (Net Income shows how well management controls operatin expenses). Project 6: Inventory Valuation 32 Fido's Food Mart Adjusted Trial Balance December 31, 20XX Credits Debits Account Title 52,898 Cash 12,250 Accounts Receivable 83,720 Inventory Supplies Prepaid Insurance Equipment 650 320 30,550 12,250 Vehicle Less: Accumulated Depreciation - Equipment & Vehicle Accounts Payable 0. 62,128 275 Unearned Revenue (Gift Cards) 12,000 Bonds Payable (mature 12/31/XX) 42,000 Common Stock (200 shares @ $210/share, par $210) Retained Earnings Sales Revenue 134,725 Less: Sales Discount 40 Cost of Goods Sold 1,000 Operating Expenses Depreciation Expense Insurance Expense 34,840 160 Rent Expense Supplies Expense Wages Expense 5,750 1,200 15,500 Totals 251,128 251,128 Inventory Data for Dog Food Date Cost each Qty. 01-Sep Sept. Beg. Inv. $0.00 Purchase 1.000 $25.00 Oct 40 $30.00 16po $20.00 0 00 $25.00 4 o Purchase Nov 349 Purchase Dec 1,500 Purchase 1,690 3,720 3,579