Question

Bridgeport Inc. is trying to determine whether to use the FIFO or average cost formula. The accounting records show the following selected inventory information:

			Purchases						Cost of Goods Sold						Ending Inventory
Date			Units		Cost		Total		Units		Cost		Total		Units		Cost		Total
Oct.	2		9,300		$11		$102,300								9,300		$11		$102,300
	15		15,500		15		232,500								[1]		[2]
															[3]		[4]		[5]
	29								22,600
									[6]		[7]
									[8]		[9]		[10]		[11]		[12]		[13]

The company accountant has prepared the following partial statement of income to help management understand the financial statement impact of each cost determination cost formula.

		FIFO		Average
Sales		$536,000		$536,000
Cost of goods sold
Gross profit
Operating expenses		217,000		217,000
Income before income tax
Income tax expense (30%)
Net income

(a)

Fill in the missing amounts in the perpetual inventory schedule, assuming the use of the FIFO cost formula.

			Purchases				Cost of Goods Sold				Ending Inventory
Date			Units	Cost	Total		Units	Cost	Total		Units	Cost	Total
	Oct. 2		9,300	$11	$102,300						9,300	$11	$102,300
	15		15,500	15	232,500						enter a number of units	enter a dollar amount
											enter a number of units	enter a dollar amount	$enter a total amount
	29						22,600	(total units sold)
							enter a number of units	$enter a dollar amount
							enter a number of units	enter a dollar amount	$enter a total amount		enter a number of units	enter a dollar amount	enter a total amount

Answer 1

FIFO

		Purchases		Cost of	Goods	Sold	Ending		Inventory
Date	Units	Cost	Total	Units	Cost	Total	Units	Cost	Total
Oct. 2	9,300	11	102,300				9,300	11	102,300
15	15,500	15	232,500				9,300	11.00
							15,500	15.00	334,800
29				9,300	11.00	102,300
				13,300	15.00	199,500	2,200	15.00	33,000

Average Cost

		Purchases		Cost of	Goods	Sold	Ending		Inventory
Date	Units	Cost	Total	Units	Cost	Total	Units	Cost	Total
Oct. 2	9,300	11	102,300				9,300	11	102,300
15	15,500	15	232,500				24,800	13.50	334,800
29				22,600	13.50	305,100	2,200	13.50	29,700

	FIFO	Average
Sales	536,000	536,000
Cost of goods sold	301,800	305,100
Gross profit	234,200	230,900
Operating expenses	217,000	217,000
Income before income tax	17,200	13,900
Income tax expense (30%)	5,160	4,170
Net income	12,040	9,730