COMPARISON OF IDENTIFIED COST AND FIFO – Suggested Soln Cars R Us sells car parts and car accessories. On 1 June, Inventory records revealed the following Inventory item: A1 Deluxe Car Battery, 8 units on hand, $140 each During June, the following transactions occurred relating to the A1 Deluxe Car Battery: 7 June Sold 6 batteries to Ace Auto Club $260 each + $26 GST (Inv 4122) 11 June Purchased 10 batteries, $120 each + $12 GST (Chq 45) 14 June Sold 4 batteries, $260 each + S26 GST (Rec 123) (1 was from the original units on hand and 3 were from the June 11 purchase) 18 June Ace Auto Club returned 2 of the batteries it purchased on the June 7 as they were faulty (CN 66) 20 June Returned those 2 faulty batteries back to supplier (CN 208) 25 June The owner gave 2 batteries as prizes for the local school's annual raffle (Memo 15) using the batteries from the June 11 purchase 30 June A stocktake revealed 5 A1 Deluxe Car Batteries on hand which were all from the June 11 purchase. (Memo 16) a) The owner is considering using FIFO when recording on the inventory cards. Re-do the inventory card for the transactions above using FIFO. Item: A1 Deluxe Car Battery Cost Method: FIFO OUT Unit Price IN BALANCE Unit Total Total Unit Total Date Details Qty Price Oty Oty Price b) Explain why businesses adopt the FIFO cost assignment method.
COMPARISON OF IDENTIFIED COST AND FIFO – Suggested Soln Cars R Us sells car parts and car accessories. On 1 June, Inventory records revealed the following Inventory item: A1 Deluxe Car Battery, 8 units on hand, $140 each During June, the following transactions occurred relating to the A1 Deluxe Car Battery: 7 June Sold 6 batteries to Ace Auto Club $260 each + $26 GST (Inv 4122) 11 June Purchased 10 batteries, $120 each + $12 GST (Chq 45) 14 June Sold 4 batteries, $260 each + S26 GST (Rec 123) (1 was from the original units on hand and 3 were from the June 11 purchase) 18 June Ace Auto Club returned 2 of the batteries it purchased on the June 7 as they were faulty (CN 66) 20 June Returned those 2 faulty batteries back to supplier (CN 208) 25 June The owner gave 2 batteries as prizes for the local school's annual raffle (Memo 15) using the batteries from the June 11 purchase 30 June A stocktake revealed 5 A1 Deluxe Car Batteries on hand which were all from the June 11 purchase. (Memo 16) a) The owner is considering using FIFO when recording on the inventory cards. Re-do the inventory card for the transactions above using FIFO. Item: A1 Deluxe Car Battery Cost Method: FIFO OUT Unit Price IN BALANCE Unit Total Total Unit Total Date Details Qty Price Oty Oty Price b) Explain why businesses adopt the FIFO cost assignment method.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:COMPARISON OF IDENTIFIED COST AND FIFO – Suggested Soln
Cars R Us sells car parts and car accessories. On 1 June, Inventory records revealed the following Inventory
item:
A1 Deluxe Car Battery, 8 units on hand, $140 each
During June, the following transactions occurred relating to the A1 Deluxe Car Battery:
7 June Sold 6 batteries to Ace Auto Club $260 each + $26 GST (Inv 4122)
11 June Purchased 10 batteries, $120 each + $12 GST (Chq 45)
14 June Sold 4 batteries, $260 each + S26 GST (Rec 123) (1 was from the original units on hand
and 3 were from the June 11 purchase)
18 June Ace Auto Club returned 2 of the batteries it purchased on the June 7 as they were faulty (CN 66)
20 June Returned those 2 faulty batteries back to supplier (CN 208)
25 June The owner gave 2 batteries as prizes for the local school's annual raffle (Memo 15)
using the batteries from the June 11 purchase
30 June A stocktake revealed 5 A1 Deluxe Car Batteries on hand which were all from the June 11
purchase. (Memo 16)
a)
The owner is considering using FIFO when recording on the inventory cards. Re-do the
inventory card for the transactions above using FIFO.
Item: A1 Deluxe Car Battery
Cost Method: FIFO
OUT
Unit
Price
IN
BALANCE
Unit
Total
Total
Unit
Total
Date
Details
Qty
Price
Oty
Oty
Price
b)
Explain why businesses adopt the FIFO cost assignment method.
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