QUESTION 1: Perpetual Inventory System- LIFO, FIFO AND AVCO.Overton Company uses a perpetual inventory system for its single product. Its beginning inventory, purchases and sales during calendar year 2021follow.DateActivityUnits Acquired at CostUnits Sold at RetailUnit InventoryJan 1Beg. Inventory400 units @ $14 = $ 5,600 400 unitsJan 15Sale 200 units @ $ 30200 unitsMarch 10Purchase200 units @ $ 15 = $ 3,000 400 unitsApril 1Sale 200 units @ $ 30200 unitsMay 9Purchase300 units @ $ 16 = $ 4,800 500 unitsSept 22Purchase250 units @ $ 20 = $ 5,000 750 unitsNov 1Sale 300 units @ $ 35450 unitsNov 28Purchase100 units @ $ 21 550 unitsTotals 1,250 units $ 20,500700 units RequiredCalculate the cost of goods available for sale.Calculate (a) ending inventory and ( b) Cost of goods sold under the LIFO and AVCO inventory costing methods. Given that expenses after gross profittotalled $ 5,000.00, compute the gross and net profit earned by the company under the LIFO and AVCO costing methods. If the company had used the FIFO inventory costing method, cost of goods sold under FIFO would have been $ 10,200.00. Management wants a report that shows how changing from FIFO to another method would change net income. Prepare a table showing (1) the amount by which cost of goods sold under LIFO and AVCO is different from the FIFO cost of goods sold and ( 2) the effect on net income when LIFO and AVCO are used instead of FIFO. When costs are rising, what is the effect of the FIFO inventory valuation approach on cost of goods sold, gross profit and net income? Why?

Name: QUESTION 1: Perpetual Inventory System- LIFO, FIFO AND AVCO.Overton Co
Uploaded: 2024-03-20T06:32:37.000Z
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Description: QUESTION 1: Perpetual Inventory System- LIFO, FIFO AND AVCO.Overton Company uses a perpetual inventory system for its single product. Its beginning inventory, purchases and sales during calendar year 2021follow.DateActivityUnits Acquired at CostUnits

FIFO METHOD:— In this Method, Firstly First input is used for sales or output. It stands for 'first…

Answered: Calculate the cost of goods available…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

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Chapter1: Financial Statements And Business Decisions

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QUESTION 1: Perpetual Inventory System- LIFO, FIFO AND AVCO.

Overton Company uses a perpetual inventory system for its single product. Its beginning inventory, purchases and sales during calendar year 2021follow.

Date	Activity	Units Acquired at Cost	Units Sold at Retail	Unit Inventory
Jan 1	Beg. Inventory	400 units @ $14 = $ 5,600		400 units
Jan 15	Sale		200 units @ $ 30	200 units
March 10	Purchase	200 units @ $ 15 = $ 3,000		400 units
April 1	Sale		200 units @ $ 30	200 units
May 9	Purchase	300 units @ $ 16 = $ 4,800		500 units
Sept 22	Purchase	250 units @ $ 20 = $ 5,000		750 units
Nov 1	Sale		300 units @ $ 35	450 units
Nov 28	Purchase	100 units @ $ 21		550 units
Totals		1,250 units $ 20,500	700 units

Required

Calculate the cost of goods available for sale.
Calculate (a) ending inventory and ( b) Cost of goods sold under the LIFO and AVCO inventory costing methods.
Given that expenses after gross profittotalled $ 5,000.00, compute the gross and net profit earned by the company under the LIFO and AVCO costing methods.
If the company had used the FIFO inventory costing method, cost of goods sold under FIFO would have been $ 10,200.00. Management wants a report that shows how changing from FIFO to another method would change net income. Prepare a table showing (1) the amount by which cost of goods sold under LIFO and AVCO is different from the FIFO cost of goods sold and ( 2) the effect on net income when LIFO and AVCO are used instead of FIFO.
When costs are rising, what is the effect of the FIFO inventory valuation approach on cost of goods sold, gross profit and net income? Why?

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If the company had used the FIFO inventory costing method, cost of goods sold under FIFO would have been $ 10,200.00. Management wants a report that shows how changing from FIFO to another method would change net income. Prepare a table showing (1) the amount by which cost of goods sold under LIFO and AVCO is different from the FIFO cost of goods sold and ( 2) the effect on net income when LIFO and AVCO are used instead of FIFO.
When costs are rising, what is the effect of the FIFO inventory valuation approach on cost of goods sold, gross profit and net income? Why?

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