Answer:
Transactions Units Unit Cost Total Cost
a. Inventory, Beginning 4,000 $ 20 80,000
b. Purchase, March 5 10,000 21 210,000
c. Purchase, September 19 6,000 23 138,000
d. Sale, April 15 4,500 65 292500
e. Sale, October 31 9,000 68 612000
f. Operating expenses $615,000
Ending Inventory Units 6,500
Cost of Good Available for Sale = 80,000+ 210,000+ 138,000= $428,000
The number of units in ending inventory = Beginning + Purchases - Sales
=4000+ 10,000+ 6000- 4,500- 9,000
= 6500
FIFO cost of ending inventory $ 148500
6,000 units at $ 23 =$138,000
500 units at $ 21= $ 10500
FIFO cost of goods sold = Sales - FIFO Ending Inventory
= $ 904500- $ 148500= $ 756000
LIFO cost of ending inventory $ 132500
4,000 units at $ 20 =$80,000
2500 units at $ 21= $ 52500
LIFO cost of goods sold = Sales - LIFO Ending Inventory
= $ 904500- $ 132500= $ 772000
Weighted cost of ending inventory = ($428,000/20,000)*6500= $ 139100
Weighted cost of goods sold = Sales - Weighted Ending Inventory
=$ 904500-$ 139100= $765400
Scoresby Inc. tracks
Income Statement
FIFO LIFO Weighted Method
Sales $ 904500 $ 904500 $ 904500
Cost OF Good $756000 $ 772000 $765400
Sold
Gross Profit $ 148500 $ 132500 $ 139100
Less
<u>Operating expenses $615,000 $615,000 $615,000 </u>
Net Loss (466,500) (482,500) (475,900)
4.LIFO minimizes taxes as it gives the lowest gross profit assigning the oldest values to ending inventory.
