Question

On December 1, Oriole Company has three DVD players left in stock. All are identical, all are priced to sell at $200. One of the three DVD players left in stock, with serial #1012, was purchased on June 1 at a cost of $114. Another, with serial #1045, was purchased on November 1 for $95. The last player, serial #1056, was purchased on November 30 for $81.

Calculate the cost of goods sold using the FIFO periodic inventory method assuming that two of the three players were sold by the end of December,Oriole Company year-end.

Cost of good sold$-

If Oriole Company used the specific identification method instead of the FIFO method, how might it alter its earnings by “selectively choosing” which particular players to sell to the two customers? What would Oriole’s cost of goods sold be if the company wished to minimize earnings? Maximize earnings?

Cost of goods sold would be $ _____________ if it wished to minimize the earning

Cost of goods sold would be $ _____________ if it wished to maximize the earning

Answer 1

Cost of goods sold under FIFO periodic inventory method :

$ 114 + $ 95 = $ 209

Cost of closing inventory under FIFO periodic inventory method = $ 81

If specific inventory method used cost of goods sold would be $ 114 + $95 = $ 209 if it wished to minimize the earning. Then the net earnings = [$ 200X 2 ] - $ 209 = $ 191. By selective choosing # 1012 and # 1045 has been selected for sell.

Under specific inventory method cost of goods sold would be $ 95 + $ 81 = $ 176 if it wished to maximize the earning .Then the net earnings = [ $ 200 X 2] - $ 176 = $ 224 . By selective choosing # 1045 and # 1056 has been selected for sell.