Asked by Elizabeth Hubbard on Jun 03, 2024
Verified
Tool City,Inc.had 300 cordless screwdrivers on hand at January 1,2015 costing $45 each.Purchases and sales of cordless screwdrivers during the month of January were as follows:
Date Purchases Sales January 9200@$75 January 14 100@$47 January 23 75@$76 January 25 100@$48 January 30 75@$77\begin{array}{lll}\text { Date } & \text { Purchases } & \text { Sales }\\\text { January } 9 & & 200 @ \$ 75 \\\text { January 14 } & 100 @ \$ 47 \\\text { January 23 } && 75 @ \$ 76 \\\text { January 25 } & 100 @ \$ 48 &\\ \text { January 30 } && 75 @ \$ 77 \end{array} Date January 9 January 14 January 23 January 25 January 30 Purchases 100@$47100@$48 Sales 200@$7575@$7675@$77
Tool City does not maintain perpetual inventory records.According to a physical count,150 cordless screwdrivers were on hand at January 31,2015.
Required:
a.What is the cost of the inventory at January 31,2015 under the FIFO method?
b.What is the cost of the inventory at January 31,2015 under the LIFO method?
c.What is the cost of the inventory at January 31,2015 under the FIFO method if only 145 cordless screwdrivers were on hand at the time of the physical count? Based on the data given,what is the most likely explanation for the fact that only 145 cordless screwdrivers were actually counted?
FIFO
"First-In, First-Out," an inventory valuation method where goods first purchased or produced are the first to be sold, affecting the cost of goods sold and ending inventory.
LIFO
An inventory valuation method called "Last In, First Out" where the most recently produced or purchased items are the first to be expensed as cost of goods sold.
Cordless Screwdrivers
Electric screwdrivers that operate without a direct power supply connection, using rechargeable batteries instead.
- Examine the impact of applying First-In, First-Out (FIFO), Last-In, First-Out (LIFO), and the lower of cost or market valuation methods on financial reports.
- Compute and analyze the significance of the inventory turnover ratio on organizational functions.
- Recognize and amend inaccuracies in inventory valuation and comprehend their implications on financial reports.
Verified Answer
January 25 100@$48$4,800 January 14 50@$47$2,350Ending Inventory under FIFO 150 Units $7,150\begin{array}{rcc}\text { January 25 } & 100 @ \$ 48 & \$ 4,800 \\\text { January 14 } & 50 @ \$ 47 & \$ 2,350 \\\text {Ending Inventory under FIFO } & 150 \text { Units } & \mathbf{\$ 7 ,1 5 0}\end{array} January 25 January 14 Ending Inventory under FIFO 100@$4850@$47150 Units $4,800$2,350$7,150
b. LIFO
Beginning Inventory 150@$45$6,750 Ending Inventory under LIFO 150 Units $6,750\begin{array}{rrr}\text { Beginning Inventory } & 150 @ \$ 45 & \mathbf{\$ 6 , 7 5 0} \\\text { Ending Inventory under LIFO } & 150 \text { Units } & \mathbf{\$ 6 , 7 5 0}\end{array} Beginning Inventory Ending Inventory under LIFO 150@$45150 Units $6,750$6,750
c. FIFO
January 25100@$48$4,800 January 1445@$47$2,115‾ Ending Inventory under FIFO 145 Units 6,915‾\begin{array}{rcc}\text { January } 25 & 100 @ \$ 48 & \$ 4,800 \\\text { January } 14 & 45 @ \$ 47 & \underline{\$ 2,115} \\\text { Ending Inventory under FIFO } & 145 \text { Units } & \underline{\mathbf{6 , 9 1 5}}\end{array} January 25 January 14 Ending Inventory under FIFO 100@$4845@$47145 Units $4,800$2,1156,915 The 5 units are most likely missing due to inventory shrinkage.
Learning Objectives
- Examine the impact of applying First-In, First-Out (FIFO), Last-In, First-Out (LIFO), and the lower of cost or market valuation methods on financial reports.
- Compute and analyze the significance of the inventory turnover ratio on organizational functions.
- Recognize and amend inaccuracies in inventory valuation and comprehend their implications on financial reports.
Related questions
Firms That Use FIFO Inventory Cost Assumptions Always Include Some ...
If the Proper Correcting Entries Were Made at the End ...
For the Year 2015,the Gross Profit of Alpha Company Was ...
Laura Company Received Merchandise on December 31, 2010 ...
The Correct 2010 Net Income for Margie Company, After Error ...