Question
Emilys Tackle Shop uses a periodic inventory system and has the following transactions related to its top-selling Shimano fishing reel for the month of June
- Emilys Tackle Shop uses a periodic inventory system and has the following transactions related to its top-selling Shimano fishing reel for the month of June 2010:
Date | Transactions | Units | Cost per Unit | Total Cost |
Jun 1 | Beg. inventory | 16 | $300 | $4,800 |
Jun 7 | Sale | 11 |
|
|
Jun 12 | Purchase | 10 | 290 | 2,900 |
Jun 15 | Sale | 12 |
|
|
Jun 24 | Purchase | 10 | 280 | 2,800 |
Jun 27 | Sale | 8 |
|
|
Jun 29 | Purchase | 10 | 270 | 2,700 |
| 15 units left June 30 |
| 13,200 |
Required:
- Using the FIFO method, calculate ending inventory and cost of goods sold at June 30, 2010.
- Using the LIFO method, calculate ending inventory and cost of goods sold at June 30, 2010.
- Calculate the LIFO reserve.
- Using the average cost method, calculate ending inventory and cost of goods sold at June 30, 2010.
- Repeat 1 and 2 as if Emily used the perpetual method.
2.
- LIFO Liquidation: When a LIFO company sells more inventory than it purchases, items from beginning inventory become COGS.
ABC Tractors is a tractor retailer which uses the LIFO cost flow assumption for inventory. ABC has beginning inventory worth $220, which consists of two tractors purchased for $70 two years ago and one tractor purchased for $80 last year.
Scenario 1: During July, ABC purchases three additional tractors for $120 each Scenario 2: During July, ABC purchases only two additional tractors for $120 each
On the last day of July, ABC sells three tractors for $140 each.
What is the difference between the gross margin under Scenario 1, where ABC does not liquidate LIFO layers, and Scenario 2, where ABC liquidates LIFO layers?
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