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Communication
Golden Eagle Company began operations on April 1 by selling a single product. Data on purchases and sales for the year are as follows:
Purchases:
Date | Units Purchased | Unit Cost | Total Cost |
April 6 | 31,000 | $36.60 | $1,134,600 |
May 18 | 33,000 | 39.00 | 1,287,000 |
June 6 | 40,000 | 39.60 | 1,584,000 |
July 10 | 40,000 | 42.00 | 1,680,000 |
August 10 | 27,200 | 42.75 | 1,162,800 |
October 25 | 12,800 | 43.50 | 556,800 |
November 4 | 8,000 | 44.85 | 358,800 |
December 10 | 8,000 | 48.00 | 384,000 |
200,000 | $8,148,000 |
Sales:
April | 16,000 units |
May | 16,000 |
June | 20,000 |
July | 24,000 |
August | 28,000 |
September | 28,000 |
October | 18,000 |
November | 10,000 |
December | 8,000 |
Total Units | 168,000 |
Total sales | $10,000,000 |
The president of the company, Connie Kilmer, has asked for your advice on which inventory cost flow method should be used for the 32,000-unit physical inventory that was taken on December 31. The company plans to expand its product line in the future and uses the periodic inventory system.
Write a brief memo to Ms. Kilmer comparing and contrasting the LIFO and FIFO inventory cost flow methods and their potential impacts on the company’s financial statements.
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Chapter 6 Solutions
Financial & Managerial Accounting
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