Question
Alternative Inventory Methods Garrett Company has the following transactions during the months of April and May: Date Transaction Units Cost/Unit April 1 Balance 300 17
Alternative Inventory Methods
Garrett Company has the following transactions during the months of April and May:
Date | Transaction | Units | Cost/Unit |
April 1 | Balance | 300 | |
17 | Purchase | 200 | $5.10 |
25 | Sale | 150 | |
28 | Purchase | 100 | 5.70 |
May 5 | Purchase | 250 | 5.10 |
18 | Sale | 300 | |
22 | Sale | 50 |
The cost of the inventory on April 1 is $5, $4, and $2 per unit, respectively, under the FIFO, average, and LIFO cost flow assumptions.
Required:
1. Compute the inventories at the end of each month and the cost of goods sold for each month for the following alternatives:
- FIFO periodic
Cost of Goods Sold Ending Inventory April $ $ May $ $ - FIFO perpetual
Cost of Goods Sold Ending Inventory April $ $ May $ $ - LIFO periodic
Cost of Goods Sold Ending Inventory April $ $ May $ $ - LIFO perpetual (Round your intermediate calculations to the nearest cent.)
Cost of Goods Sold Ending Inventory April $ $ May $ $ - Weighted average (Round unit costs to 4 decimal places and final answers to the nearest dollar.)
Cost of Goods Sold Ending Inventory April $ $ May $ $ - Moving average (Round unit costs to 2 decimal places and final answers to nearest dollar.)
Cost of Goods Sold Ending Inventory April $ $ May $ $
2. Reconcile the difference between the LIFO periodic and the LIFO perpetual results. If an amount is zero, enter "0".
April | Cost of Goods Sold | Ending Inventory |
Difference | $ | $ |
May | Cost of Goods Sold | Ending Inventory |
Difference | $ | $ |
3. If Garrett uses IFRS, which of the previous alternatives would be acceptable, and why?
If Garrett Company uses IFRS, it may report its inventory under ___________________________ . It may not use __________________ under IFRS because it is not consistent with any presumed physical flow of inventory. Also,_____________________________ is not allowed for tax purposes in most other countries, so there is no tax incentive for a company to use ___________________________ . Note that companies that use IFRS and have rising inventory costs will report a higher income because they include holding gains in income.
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