Question
How would I work the following problem? Using a periodic system Mower-Blower Sales Co. started business on Jan 20, 2016. Products sold were snow blowers
How would I work the following problem?
Using a periodic system Mower-Blower Sales Co. started business on Jan 20, 2016. Products sold were snow blowers and lawn mowers. Each product sold for $1400. Purchased during 2016 were as follows
Blowers | Mowers | |||
21-Jan | 20 x 800 | |||
3-Feb | 40 x 780 | |||
28-Feb | 30 x 760 | |||
13-Mar | 20 x 760 | |||
6-Apr | 20 x 840 | |||
22-May | 40 x 860 | |||
3-Jun | 40 x 880 | |||
20-Jun | 60 x 920 | |||
15-Aug | 20 x 860 | |||
20-Sep | 20 x 840 | |||
7-Nov | 20 x 800 |
The December 31, 2016, inventory included 10 blowers and 25 mowers.
Assume the company uses a periodic inventory system.
a. What will be the difference between ending inventory valuation at December 31, 2016, under the FIFO and LIFO cost flow assumptions? (Hint: Compute ending inventory under each method, and then compare results.)
b. If the cost of mowers had increased to $960 each by December 1, and if management had purchased 30 mowers at that time, which cost flow assumption was probably being used by the firm? Explain your answer.
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