Question

Carpenter Corporation is a United Stated merchandising business. The corporation extensively uses scan technology in a perpetual inventory system; and in the past, the corporation has valued inventory using the LIFO cost flow assumption. Carpenter Corporation is seeking new markets outside the United States and wishes to restate its Inventory on the Financial Statements, based on International Financial Reporting Standards. Using the following information, and assuming that Carpenter Corporation will not use an average cost method of cost flows, what is the Cost of Merchandise Sold on the restated Income Statement which will be acceptable under both US GAAP and International IFRS, for the month ended September 30?

Sep. 1         Inventory 21 units at $21

         4        Sold 10 units

       10        Purchased 30 units at $28

       17        Sold 22 units

       30        Purchased 10 units at $30

Answer 1

As we know that LIFO method is not acceptable under IFRS but FIFO method is acceptable under IFRS and GAAPs. So let’s calculate merchandise sold as per FIFO method because this method is permitted as per IFRS and GAAPs.

It is also given in the question that Carpenter Corporation have perpetual inventory system. Thus cost of merchandise sold will be calculated as per FIFO (perpetual).

Total number of units sold are (10 units + 22 units) = 32 Units

Thus 32 units will be issued as follow under FIFO (Perpetual);

10 units * $21	$210
(11 units * $21) + (11 units * $28)	$539
Cost of merchandise sold	$749