Question

You have the following information for Splish Brothers Inc.. Splish Brothers Inc. uses the periodic method of accounting for its inventory transactions. Splish Brothers Inc. only carries one brand and size of diamonds all are identical. Each batch of diamonds purchased is carefully coded and marked with its purchase cost.

March 1		Beginning inventory 157 diamonds at a cost of $317 per diamond.
March 3		Purchased 219 diamonds at a cost of $364 each.
March 5		Sold 166 diamonds for $607 each.
March 10		Purchased 298 diamonds at a cost of $403 each.
March 25		Sold 414 diamonds for $588 each.

Assume that Splish Brothers Inc. uses the LIFO cost flow assumption. Calculate cost of goods sold. How much gross profit would the company report under this cost flow assumption?

Answer 1

Answer:

LIFO under Periodic
Cost of goods available for sale
	Units	x	Unit cost	=	Total cost
Mar 1 beginning	157	x	$317	=	$49,769
Mar 3 purchase	219	x	$364	=	$79,716
Mar 10 purchase	298	x	$403	=	$120,094
Cost of goods available for sale	674				$249,579
Cost of goods sold
Mar 10 purchase	298	x	$403	=	$120,094
Mar 3 purchase	219	x	$364	=	$79,716
Mar 1 beginning	63	x	$317	=	$19,971
Cost of goods sold	580				$219,781
Gross profit
Sales (166 x $607)+(414 x $588)					$344,194
(Less): cost of goods sold					($219,781)
Gross profit					$124,413