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6.4

6.4

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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E6.4

E6.4 (LO 2) On December 1, Kiyak Electronics Ltd. has three DVD players left in stock. All are iden- tical, all are priced to sell at $150. One of the three DVD players left in stock, with serial # 1012, was purchased on June 1 at a cost of $100. Another, with serial # 1045, was purchased on November 1 for $88. The last player, serial #1056, was purchased on November 30 for $80. Instructions a. Calculate the cost of goods sold using the FIFO periodic inventory method assuming that two of the three players were sold by the end of December, Kiyak Electronics' year-end. b. If Kiyak Electronics used the specific identification method instead of the FIFO method, how might it alter its earnings by "selectively choosing" which particular players to sell to the two customers? What would Kiyak's cost of goods sold be if the company wished to minimize earnings? Maximize earnings? c. Which of the two inventory methods do you recommend that Kiyak use? Explain why. Calculate cost of goods sold using specific identification and FIFO.
Transcribed Image Text:E6.4 (LO 2) On December 1, Kiyak Electronics Ltd. has three DVD players left in stock. All are iden- tical, all are priced to sell at $150. One of the three DVD players left in stock, with serial # 1012, was purchased on June 1 at a cost of $100. Another, with serial # 1045, was purchased on November 1 for $88. The last player, serial #1056, was purchased on November 30 for $80. Instructions a. Calculate the cost of goods sold using the FIFO periodic inventory method assuming that two of the three players were sold by the end of December, Kiyak Electronics' year-end. b. If Kiyak Electronics used the specific identification method instead of the FIFO method, how might it alter its earnings by "selectively choosing" which particular players to sell to the two customers? What would Kiyak's cost of goods sold be if the company wished to minimize earnings? Maximize earnings? c. Which of the two inventory methods do you recommend that Kiyak use? Explain why. Calculate cost of goods sold using specific identification and FIFO.
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