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# FIFO and LIFO accounting.?

W.B. Reindeer Company's inventory records show the following data:

Unit/Unit Cost

Inventory, January 1 5,000 \$9.00

Purchases: June 18 4,500 8.00

November 8 3,000 7.00

A physical inventory on December 31 shows 2,000 units on hand. W.B. Reindeer sells the units for \$12 each. The company has an effective tax rate of 20%. Reindeer uses the periodic inventory method.

Under FIFO method, December 31 inventory is valued at

a. \$14,000

b. \$14,500

c. \$15,000

d. \$18,000

What is the cost of goods available for sale?

Under lifo method cost of goods sold is?

The wheighted-average cost per unit is?

If the company uses FIFO what is the gross profit for the period?

What is the difference in taxes if LIFO rather than FIFO is used?

Relevance

Inventory, January 1 5,000 @ \$9.00 = \$45,000

Purchases: June 18 4,500 @ \$8.00 = \$36,000

November 8 3,000 @ \$7.00 = \$21,000

Sold 10,500 units

A physical inventory on December 31 shows 2,000 units on hand. W.B. Reindeer sells the units for \$12 each. The company has an effective tax rate of 20%. Reindeer uses the periodic inventory method.

Under FIFO method, December 31 inventory is valued at

a. \$14,000

2000 units at the latest cost of \$7 each = \$14,000

COGS = \$102,000 - \$14,000 = \$88,000

What is the cost of goods available for sale?

\$102,000

Under lifo method cost of goods sold is?

Ending inventory is 2000 units at earliest cost of \$9 each = \$18,000. COGS = \$102,000 - \$18,000 = 84,000

The weighted-average cost per unit is?

\$102,000/12,500 units = \$8.16

If the company uses FIFO what is the gross profit for the period?

Sales = 10,500 x \$12 = \$126,000

less COGS \$88,000

= Gross Profit \$38,000

Tax at 20% = \$7,600

What is the difference in taxes if LIFO rather than FIFO is used?

Sales \$126,000

less COGS \$84,000

= Gross profit \$42,000

Tax at 20% = \$8,400, so tax is \$800 higher than if FIFO is used.

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