Problem 6-5A Calculate ending inventory and cost of goods sold using FIFO and LI
ID: 2542365 • Letter: P
Question
Problem 6-5A Calculate ending inventory and cost of goods sold using FIFO and LIFO and adjust inventory using lower of cost and net realizable value (LO6-3, 6-6) The following inforrmatioapplesto the questionis displayed below. For the current year, Parker Games has the following inventory transactions related to its traditional board games. Parker Games usos a periodic inventory system Date Transaction Units Cost Total Cost Jar. 1 Mar. 12 Beginning inventory Purchase Purchase 20 $21 2.520 1410 540 16 Sep. 17 270 $ 1,500 Jan. 1-Dec. 3 Sales 170 Because of the increasing popularity of electronic video games, Parker Games continues to see a decline in the demand for board games. Sales prices have decreased by over 50% during the year. At the end of the year, Parker estimates the net realizable value the 100 units of unsold inveritory is only $500Explanation / Answer
FIFO:
Under FIFO ending inventory will be from the latest purchases respectively. out of 270 units available for sale 170 units are sold, hence 100 units of ending inventory will consist of 60 from the last purchase on Sep.17 and balance 40 from Mar. 12 purchase.
It is shown below:
Since market value of goods is $500 and cost is 1,180 the amount of adjustment required to measure inventory at market value is 1180-500 = 680
Entry is:
LIFO:
Under LIFO ending inventoy is calculated as below:
Since net realizable value is only 500, adjustment required = 2100- 500= 1600
Entry is:
FIFO Method Periodic Inventory method Cost of goods available for sale Date Explanation Units Per unit Total Jan.1 Beginning inventory 120 21 2,520 mar.12 Purchase 90 16 1,440 Sep.17 Purchase 60 9 540 Total 270 4,500 Ending inventory Date Units Per unit Total Sep.17 60 9 540 mar.12 40 16 640 Total 100 1,180 Cost of goods available for sale 4,500 Less: Ending inventory 1,180 Cost of goods sold 3,320