Chapter Seven Homework instructions I help Question 5 (of 8) Seve & Exi Submi 5.
ID: 340947 • Letter: C
Question
Chapter Seven Homework instructions I help Question 5 (of 8) Seve & Exi Submi 5. 200 points Assume that a retailer's beginning inventory and purchases of a popular item during January included: (1) 330 units at $7.30 in beginning inventory on January 1, (2) 480 units at S8.30 purchased on January 8 and (3) 780 units at $9.30 purchased on January 29. The company sold 380 units on January 12 and 580 units on January 30. Required: 1. Calculate the cost of goods sold for the month of January under (a) FIFO (periodic calculation), (b) FIFO iperpetual calculatian), (c) LIFO (periodic calculation), and (d) LIFO (perpetual calculation). Cost of Goods S old a. | FIFO (periodic calculation b. FIFO (perpetual calculatian) C. LIFO (periodic calculation) d. LIFO (perpetual calculation) 2. Which cost flow assumption and calculation approach would you recommend to management in order to save taxes? FIFO Periodic FIFO Perpetual LIFO Periodic LIFO PerpetualExplanation / Answer
1.Calculation of Cost of goods sold
a. 330*7.3+480*8.3+150*9.3 = 7788
b. 330*7.3+50*8.3+430*8.3+150*9.3 = 7788
c. 780*9.3+180*8.3 = 8748
d. 380*8.3+580*9.3 = 8548
2. In order to save taxes,
Cost of goods sold is different under FIFO and LIFO method, and if cost of goods sold is low, means gross profit will increase means tax is to be paid on profit.
So, to save taxes the management should follow that method which gives the high cost of goods sold means LIFO (perodic calculation) method.