Alta Ski Company’s inventory records contained the following information regarding its latest ski model. The company uses a periodic inventory system. Beginning inventory, January 1, 2021 600 units @ $80 each Purchases: January 15 1,000 units @ $95 each January 21 800 units @ $100 each Sales: January 5 400 units @ $120 each January 22 800 units @ $130 each January 29 400 units @ $135 each Ending inventory, January 31, 2021 800 units 3a. Assume that inventory costs were declining during January. The inventory purchased on January 15 had a unit cost of $70, and the inventory purchased on January 21 had a unit cost of $65. All other information is the same. Which method, FIFO or LIFO, will result in the highest cost of goods sold figure for January 2021? 3b. Which method will result in the highest ending inventory balance? 3c. Compute cost of goods sold for January and the ending inventory using both the FIFO and LIFO methods.
Alta Ski Company’s inventory records contained the following information regarding its latest ski model. The company uses a periodic inventory system. Beginning inventory, January 1, 2021 600 units @ $80 each Purchases: January 15 1,000 units @ $95 each January 21 800 units @ $100 each Sales: January 5 400 units @ $120 each January 22 800 units @ $130 each January 29 400 units @ $135 each Ending inventory, January 31, 2021 800 units 3a. Assume that inventory costs were declining during January. The inventory purchased on January 15 had a unit cost of $70, and the inventory purchased on January 21 had a unit cost of $65. All other information is the same. Which method, FIFO or LIFO, will result in the highest cost of goods sold figure for January 2021? 3b. Which method will result in the highest ending inventory balance? 3c. Compute cost of goods sold for January and the ending inventory using both the FIFO and LIFO methods.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Alta Ski Company’s inventory records contained the following information regarding its latest ski model. The company uses a periodic inventory system.
| Beginning inventory, January 1, 2021 | 600 | units @ $80 each |
| Purchases: | ||
| January 15 | 1,000 | units @ $95 each |
| January 21 | 800 | units @ $100 each |
| Sales: | ||
| January 5 | 400 | units @ $120 each |
| January 22 | 800 | units @ $130 each |
| January 29 | 400 | units @ $135 each |
| Ending inventory, January 31, 2021 | 800 | units |
3a. Assume that inventory costs were declining during January. The inventory purchased on January 15 had a unit cost of $70, and the inventory purchased on January 21 had a unit cost of $65. All other information is the same. Which method, FIFO or LIFO, will result in the highest cost of goods sold figure for January 2021?
3b. Which method will result in the highest ending inventory balance?
3c. Compute cost of goods sold for January and the ending inventory using both the FIFO and LIFO methods.
Transcribed Image Text:Cost of Goods Available for Sale
Cost of Goods Sold - Periodic
Inventory Balance - Periodic FIFO
- FIFO
FIFO
Cost of
Goods
Available for
Sale
FIFO:
# of
Cost per
unit
# of units
in ending
inventory
# of
Cost per
unit
Cost of
Goods Sold
Cost per
unit
Ending
Inventory
units
units
sold
Beg. Inventory
600 $ 80.00 $
48,000
$
80.00
$
80.00 $
Purchases:
January 15
1,000
70.00
70,000
70.00
70.00
January 21
800
65.00
52,000
65.00
65.00
Total
2,400
$ 170,000
$
$
Cost of Goods Available for Sale
Cost of Goods Sold - Periodic
LIFO
Inventory Balance - Periodic LIFO
- LIFO
Cost of
Goods
Available for
Sale
LIFO:
# of
# of
units
Cost per
unit
Cost per
unit
Cost of
Goods Sold
# of units
in ending
inventory
Cost per
unit
Ending
Inventory
units
sold
Beg. Inventory
600 $ 80.00 $
48,000
$
80.00
$
80.00 $
Purchases:
January 15
1,000
70.00
70,000
70.00
70.00
January 21
800
65.00
52,000
65.00
65.00
Total
2,400
$ 170,000
$
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