Dempsey Inc is a retailer operating in British Columbia. Dempsey uses the perpetual inventory method. All sales returns from customers result in the goods being returned to inventory, the inventory is not damaged. Assume that there are no credit transactions; all amounts are settled in cash. you are provided with the following information for Dempsey Inc. for the month of January 2019.
Instructions
- For each of the following cost flow assumptions, Calculate (i) cost of goods sold, (ii) ending inventory, and (iii) gross profit.
- LIFO
- FIFO
- Average-cost
- Compare results for the three cost flow assumptions.
Solution
a.
Dempsey Inc
1
LIFO Method
1 (ii)
2
FIFO Method
2 (ii)
3.
Average Cost Method
3 (ii)
b.
In Comparison of three methods, FIFO shows the heights gross profit and LIFO shows the lowest gross profit while average cost method shows their weighted average gross profit.