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*P6.8A (LO 5) Dempsey Inc. is a retailer operating in British Columbia. Dempsey uses the perpetual inventory method. All sales returns from customers result in the goods being returned to inventory; the inventory is not damaged. Assume that there are no credit transactions; all amounts are settled in cash. You are provided with the following information for Dempsey Inc. for the month of January 2020. Date January 1 January 5 January 8 January 10 January 15 January 16 January 20 January 25 Description Beginning inventory Purchase Sale Sale return Purchase Purchase return Sale Purchase Quantity 100 140 110 10 55 5 90 20 Unit Cost or Selling Price 3. Moving-average cost. (Round cost per unit to three decimal places.) b. Compare results for the three cost flow assumptions. $15 18 28 28 20 20 32 22 Instructions a. For each of the following cost flow assumptions, calculate (i) cost of goods sold, (ii) ending inventory, and (iii) gross profit. 1. LIFO. 2. FIFO. Calculate cost of goods sold and ending inventory under LIFO, FIFO, and moving-average cost under the perpetual system; compare gross profit under each assumption. a. (iii) Gross profit: LIFO FIFO Average $2,160 $2,560 $2,421

*P6.8A (LO 5) Dempsey Inc. is a retailer operating in British Columbia. Dempsey uses the perpetual inventory method. All sales returns from customers result in the goods being returned to inventory; the inventory is not damaged. Assume that there are no credit transactions; all amounts are settled in cash. You are provided with the following information for Dempsey Inc. for the month of January 2020. Date January 1 January 5 January 8 January 10 January 15 January 16 January 20 January 25 Description Beginning inventory Purchase Sale Sale return Purchase Purchase return Sale Purchase Quantity 100 140 110 10 55 5 90 20 Unit Cost or Selling Price 3. Moving-average cost. (Round cost per unit to three decimal places.) b. Compare results for the three cost flow assumptions. $15 18 28 28 20 20 32 22 Instructions a. For each of the following cost flow assumptions, calculate (i) cost of goods sold, (ii) ending inventory, and (iii) gross profit. 1. LIFO. 2. FIFO. Calculate cost of goods sold and ending inventory under LIFO, FIFO, and moving-average cost under the perpetual system; compare gross profit under each assumption. a. (iii) Gross profit: LIFO FIFO Average $2,160 $2,560 $2,421

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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P6.8

**Educational Resource on Inventory Costing Methods** **Topic:** Inventory Costing Methods for Retailers **Case Study:** Dempsey Inc. Dempsey Inc. is a retailer located in British Columbia that uses the perpetual inventory method. Under this method, all sales returns are restocked into inventory, assuming no damage and cash transactions without credit terms. We're examining Dempsey's transactions for January 2020 with the following details: **Inventory Transactions for January 2020:** | Date | Description | Quantity | Unit Cost or Selling Price | |------------|--------------------|----------|----------------------------| | January 1 | Beginning inventory| 100 | $15 | | January 5 | Purchase | 140 | $18 | | January 8 | Sale | 110 | $28 | | January 10 | Sale return | 10 | $28 | | January 15 | Purchase | 55 | $20 | | January 18 | Purchase return | 5 | $20 | | January 20 | Sale | 90 | $32 | | January 25 | Purchase | 20 | $22 | **Instructions:** 1. **For each of the following cost flow assumptions, calculate the following:** - Cost of Goods Sold (COGS) - Ending Inventory - Gross Profit **Cost Flow Methods:** - Last-In, First-Out (LIFO) - First-In, First-Out (FIFO) - Moving-Average Cost (round cost per unit to three decimal places) 2. **Compare the results for each cost flow method.** **Calculations:** - **COGS and Gross Profit Results:** - **LIFO:** Gross Profit = $2,160 - **FIFO:** Gross Profit = $2,560 - **Average Cost:** Gross Profit = $2,421 This exercise demonstrates how different inventory costing methods influence the reported cost of goods sold and profit, emphasizing the importance of method selection in financial reporting and decision-making.
Transcribed Image Text:**Educational Resource on Inventory Costing Methods** **Topic:** Inventory Costing Methods for Retailers **Case Study:** Dempsey Inc. Dempsey Inc. is a retailer located in British Columbia that uses the perpetual inventory method. Under this method, all sales returns are restocked into inventory, assuming no damage and cash transactions without credit terms. We're examining Dempsey's transactions for January 2020 with the following details: **Inventory Transactions for January 2020:** | Date | Description | Quantity | Unit Cost or Selling Price | |------------|--------------------|----------|----------------------------| | January 1 | Beginning inventory| 100 | $15 | | January 5 | Purchase | 140 | $18 | | January 8 | Sale | 110 | $28 | | January 10 | Sale return | 10 | $28 | | January 15 | Purchase | 55 | $20 | | January 18 | Purchase return | 5 | $20 | | January 20 | Sale | 90 | $32 | | January 25 | Purchase | 20 | $22 | **Instructions:** 1. **For each of the following cost flow assumptions, calculate the following:** - Cost of Goods Sold (COGS) - Ending Inventory - Gross Profit **Cost Flow Methods:** - Last-In, First-Out (LIFO) - First-In, First-Out (FIFO) - Moving-Average Cost (round cost per unit to three decimal places) 2. **Compare the results for each cost flow method.** **Calculations:** - **COGS and Gross Profit Results:** - **LIFO:** Gross Profit = $2,160 - **FIFO:** Gross Profit = $2,560 - **Average Cost:** Gross Profit = $2,421 This exercise demonstrates how different inventory costing methods influence the reported cost of goods sold and profit, emphasizing the importance of method selection in financial reporting and decision-making.
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