Simple Plan Enterprises uses a periodic inventory system. Its records showed the following: Inventory, December 31, using FIFO → 56 Units @ $23 = $1,288 Inventory, December 31, using LIFO → 56 Units @ $19 = $1,064   Transactions in the Following Year Units Unit Cost Total Cost Purchase, January 9 68 24 $ 1,632 Purchase, January 20 118 25 2,950 Sale, January 11 (at $47 per unit) 98     Sale, January 27 (at $48 per unit) 74       Required: Compute the number and cost of goods available for sale, the cost of ending inventory, and the cost of goods sold under FIFO and LIFO. Compute the inventory turnover ratio under the FIFO and LIFO inventory costing methods. Does the inventory method used make a significant difference in the inventory turnover ratio?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Simple Plan Enterprises uses a periodic inventory system. Its records showed the following:

Inventory, December 31, using FIFO → 56 Units @ $23 = $1,288
Inventory, December 31, using LIFO → 56 Units @ $19 = $1,064

 

Transactions in the Following Year Units Unit Cost Total Cost
Purchase, January 9 68 24 $ 1,632
Purchase, January 20 118 25 2,950
Sale, January 11 (at $47 per unit) 98    
Sale, January 27 (at $48 per unit) 74    

 

Required:

  1. Compute the number and cost of goods available for sale, the cost of ending inventory, and the cost of goods sold under FIFO and LIFO.
  2. Compute the inventory turnover ratio under the FIFO and LIFO inventory costing methods.
  3. Does the inventory method used make a significant difference in the inventory turnover ratio?

 

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