Question

Park Company's perpetual inventory records indicate the following transactions in the month of June: Units Cost/Unit Inventory, June 1 200 $3.20 Purchases: June 3 200 3.50 June 17 250 3.60 June 24 300 3.65 Sales: June 6 300 June 21 200 June 27 150a. Compute the cost of goods sold for June and the inventory at the end of June, using each of the following cost flow assumptions:1. FIFO2. LIFO3. Average costb. If Park Company uses IFRS, which of the previous alternatives would be acceptable, and why?

Answer 1

Answer:

1. FIFO : Cost of Goods Sold (650 units):

June 6    300 units:      200 units at 3.20              640

                                       100 units at 3.50                    350

June 21   200 units:      100 units at 3.50                    350

                                         100 units at 3.60                    360

June 27    150 units:      150 units at 3.60                    540  

                                            total                                   2,240

(200 x3.20) + [(200 x 3.50) + (250 x 3.60) + (300 x 3.65)] - 2,240 =

=  640           +              2,695                           -            2,240 = 1,095

2)  LIFO : Cost of Goods Sold (650 units):

June 6     300 units:    100 units at 3.20          320.0

                                       200 unit at 3.50         700.00

June 21    200 units at 3.60                             720.00

June 27    150 units  at 3.65                             547.50

                                                                             2287.50

Ending Inventory (300 units):

     640                     + 2695      -          2287.50          =        1047.50

100 units at 3.20 =      320.00

 50 units at 3.60 =        180.00

150 units at 3.65 =         547.50

                                       1047.50

3. Average Cost :

June 1 - Beginning Inventory                200 units at 3.20   640

June 3 - Purchases                                 200 units at 3.50   700

June 3 -  Balance                                   400 units at 3.35      1340

June 6 -  Sales                                    300 units at 3.35         1005

June 6 -  Balance                        100 units at 3.35          335

June 17 - Purchases                250 units at 3.60        900

June 17 - Balance                   350 units at 3.53    1235

June 21 - sales                  200 units at 3.53         706)

June 21  - Balance                 150 units at 3.53       529

June 24 - Purchase         300 units at 3.65             1095

June 24 -  Balance                 450 units at 3.61     1624

June 27 - Sales                   150 units at 3.61                 541

June 30 - Balance                300 units at 3.61      1083

Cost of Goods Sold           650 units      1005 + 706 +541                  

                                                                                2252

Ending Inventory (300 units at 3.61)                      1083

Rounded