Glee Distribution markets CDs of the performing artist Unique. At the beginning of October, Glee had in beginning inventory 2,000 of Unique's CDs with a unit cost of $7. During October, Glee made the following purchases of Unique's CDs.
| Oct. 3 | 2,500 @ $8 | Oct. 19 | 3,000 @ $10 |
| Oct. 9 | 3,500 @ $9 | Oct. 25 | 4,000 @ $11 |
During October, 10,900 units were sold, Glee uses a periodic inventory system.
Instructions
- Determine the cost of goods available for sale
- Determine (1) the ending inventory, and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost). Prove the accuracy of the cost of goods under the FIFO and LIFO methods.
- Which cost flow method results in (1) the highest inventory amount for the balance sheet, and (2) the highest cost o goods sold for the income statement?
Solution
a.
Glee Distribution
b.
1.
FIFO Method
2.
LIFO Method
3.
Average Cost Method
c.
- FIFO shows the highest inventory amount for the balance sheet
- LIFO shows the highest cost of goods sold for the income statement.