Intermediate Accounting
1st Edition
ISBN: 9780132162302
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Chapter 10, Problem 10.5E
LIFO, Conversion to FIFO. Inventory transactions tor Jack Franklin stores are summarized in the following table. The company uses the LIFO perpetual method for both financial and tax reporting.
| Transaction | Units | Sales in Units | Unit Cost | Total Cost |
| Beginning inventory: January 1 | ||||
| Oldest cost | 2,000 | $5 | $ 10,000 | |
| N9xt oldest cost | 1,750 | 8 | 14,000 | |
| Total beginning inventory | 3,750 | $ 24,000 | ||
| Purchases | ||||
| January 20 | 5,000 | 9 | 45,000 | |
| February 18 | 12,000 | 11 | 137,500 | |
| Subtotal | 21,250 | $206,500 | ||
| Units sold on May 1 at $18 | 19,000 | |||
| July 28 | 18,750 | 10 | 187,500 | |
| Total available for sale | 40,000 | $394,000 | ||
| Total units sold | (19,000) | |||
| Ending inventory | 21,000 |
The inventory footnote from Jack Franklin Stores annual report indicates that the difference between the LIFO costs and the current (FIFO) costs of inventory is equal to $0 and $12,750 at the beginning and end of the year respectively.
Required
- a. Determine the ending inventory and cost of goods sold for the current year.
- b. Use the footnote information provided in the question to convert the beginning and ending inventories from a LIFO to a FIFO basis.
- c. Convert the cost of goods sold for the current year from the LIFO to the FIFO basis.
- d. Compare the inventory turnover ratio for the current year computed under the two methods of
inventory valuation .
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Chapter 10 Solutions
Intermediate Accounting
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