Please show work for each part. Instructions Compute the ending inventory at May
ID: 2550743 • Letter: P
Question
Please show work for each part.Instructions Compute the ending inventory at May 31 and cost of goods sold using the FIFO and LIFO methods. Prove the amount allocated to cost of goods sold under each method. E6-7 Kaleta Company reports the following for the month of June. Units Unit Cost Total Cost June Inventory 200 400 300 100 $1,000 2,400 2,100 $5 12 Purchase 23 Purchase 30 Inventory Instructions (a) Compute the cost of the ending inventory and the cost of goods sold under (1) FIFCo and (2) LIFO (b) Which costing method gives the higher ending inventory? Why? (c) Which method results in the higher cost of goods sold? Why?
Explanation / Answer
(A)
Calculation of ending inventory and cost of goods sold under FIFO
Ending inventory:
Date
Units
Rate
Total cost
23-Jun
100
$7
700
Cost of goods sold
Date
Units
Rate
Total cost
1-Jun
200
$5
$1,000
12-Jun
400
$6
$2,400
23-Jun
200
$7
$1,400
Total COGS
$4,800
(A)
Calculation of ending inventory and cost of goods sold under LIFO
Ending inventory:
Date
Units
Rate
Total cost
1-Jun
100
$5
500
Cost of goods sold
Date
Units
Rate
Total cost
23-Jun
300
$7
$2,100
12-Jun
400
$6
$2,400
1-Jun
100
$5
$500
Total COGS
$5,000
(B)
Which method gives higher ending inventory? Why
Ans
FIFO
Since the Purchases on 23rd June unit cost is more than previous purchases
(C )
Which method results in higher cost of goods sold? Why
LIFO
Since the latest purchases unit cost is increasing trend
(A)
Calculation of ending inventory and cost of goods sold under FIFO
Ending inventory:
Date
Units
Rate
Total cost
23-Jun
100
$7
700
Cost of goods sold
Date
Units
Rate
Total cost
1-Jun
200
$5
$1,000
12-Jun
400
$6
$2,400
23-Jun
200
$7
$1,400
Total COGS
$4,800
(A)
Calculation of ending inventory and cost of goods sold under LIFO
Ending inventory:
Date
Units
Rate
Total cost
1-Jun
100
$5
500
Cost of goods sold
Date
Units
Rate
Total cost
23-Jun
300
$7
$2,100
12-Jun
400
$6
$2,400
1-Jun
100
$5
$500
Total COGS
$5,000