
Concept explainers
(a)
First-in-First-Out:
In First-in-First-Out (FIFO) method, the costs of the initially purchased items are considered as cost of goods sold, for the items which are sold first. The value of the ending inventory consists of the recent purchased items.
Last-in-First-Out:
In Last-in-First-Out (LIFO) method, the costs of the last purchased items are considered as the cost of goods sold, for the items which are sold first. The value of the closing stock consists of the initial purchased items.
Average Cost:
In Average Cost method, the cost of inventory is priced at the average rate of the goods available for sale. Following is the mathematical representation to calculate the weighted-average cost:
To Compute: The cost of ending inventory, and cost of goods sold of Company L under FIFO, LIFO, and Average Cost methods.
(b)
First-in-First-Out:
In First-in-First-Out (FIFO) method, the costs of the initially purchased items are considered as cost of goods sold, for the items which are sold first. The value of the ending inventory consists of the recent purchased items.
Last-in-First-Out:
In Last-in-First-Out (LIFO) method, the costs of the last purchased items are considered as the cost of goods sold, for the items which are sold first. The value of the closing stock consists of the initial purchased items.
Average Cost:
In Average Cost method, the cost of inventory is priced at the average rate of the goods available for sale. Following is the mathematical representation to calculate the weighted-average cost:
To identify: the cost flow method which would result in the highest net income.
(c)
First-in-First-Out:
In First-in-First-Out (FIFO) method, the costs of the initially purchased items are considered as cost of goods sold, for the items which are sold first. The value of the ending inventory consists of the recent purchased items.
Last-in-First-Out:
In Last-in-First-Out (LIFO) method, the costs of the last purchased items are considered as the cost of goods sold, for the items which are sold first. The value of the closing stock consists of the initial purchased items.
Average Cost:
In Average Cost method, the cost of inventory is priced at the average rate of the goods available for sale. Following is the mathematical representation to calculate the weighted-average cost:
the cost flow method which would result in inventories approximating current cost in the balance sheet.
(d)
First-in-First-Out:
In First-in-First-Out (FIFO) method, the costs of the initially purchased items are considered as cost of goods sold, for the items which are sold first. The value of the ending inventory consists of the recent purchased items.
Last-in-First-Out:
In Last-in-First-Out (LIFO) method, the costs of the last purchased items are considered as the cost of goods sold, for the items which are sold first. The value of the closing stock consists of the initial purchased items.
Average Cost:
In Average Cost method, the cost of inventory is priced at the average rate of the goods available for sale. Following is the mathematical representation to calculate the weighted-average cost:
the cost flow method which would result in the least payment of taxes in the first year by Company L.

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Chapter 6 Solutions
Financial Accounting, 10e WileyPLUS Registration Card + Loose-leaf Print Companion
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