Question Completion:
A physical count of inventory on December 31 revealed that there were 55 units on hand.
Answer:
Faster Company
a. Assume that the company uses the FIFO method. The value of the ending inventory at December 31 is $:____516______
b. Assume that the company uses the average-cost method. The value of the ending inventory on December 31 is $:____488.40_____
c. Assume that the company uses the LIFO method. The value of the ending inventory on December 31 is $:__472_______
1. The difference in the amount of income if it had used the FIFO method instead of the LIFO:
Cost of goods sold under FIFO = $816
Cost of goods sold under LIFO = $860
Difference in income = $44
2. The income would have been greater by $44 because the FIFO charges less cost than the LIFO, especially when costs are rising.
Explanation:
a) Data and Calculations:
Faster uses the periodic inventory method.
Date Units Unit Cost Total Cost
1/1 Beginning Inventory 15 $8.00 $120
1/20 Purchase 60 $8.80 528
7/25 Purchase 30 $8.40 252
10/20 Purchase 45 $9.60 432
Total 150 $1,332
Ending inventory 55
Units of goods sold 95
Average cost = $1,332/150 = $8.88
Under FIFO:
Ending Inventory = 45*$9.60 + 10*$8.40 = $516
Cost of goods sold = Cost of goods available for sale minus the Ending Inventory = $1,332 - 516 = $816.
Under Average-Cost Method:
Ending Inventory = 55 * $8.88 = $488.40
Cost of goods sold = 95 * $8.88 = $843.60
Under LIFO method:
Ending Inventory = 15*$8.00 + 40*$8.80 = $472
Cost of goods sold = $860 ($1,332 - $472)
