Question

You are provided with the following information for Splish Brothers Inc. Splish Brothers Inc. uses the...

You are provided with the following information for Splish Brothers Inc. Splish Brothers Inc. uses the periodic system of accounting for its inventory transactions.

March 1 Beginning inventory 1,935 liters at a cost of 58¢ per liter.

March 3 Purchased 2,475 liters at a cost of 63¢ per liter.

March 5 Sold 2,330 liters for $1.05 per liter.

March 10 Purchased 3,945 liters at a cost of 70¢ per liter.

March 20 Purchased 2,490 liters at a cost of 78¢ per liter.

March 30 Sold 5,165 liters for $1.35 per liter.

(a1) Calculate the value of ending inventory that would be reported on the balance sheet, under each of the following cost flow assumptions. (Round answers to 2 decimal places, e.g. 125.25.)

(1) Specific identification method assuming:

(i) The March 5 sale consisted of 1,000 liters from the March 1 beginning inventory and 1,330 liters from the March 3 purchase; and

ii) The March 30 sale consisted of the following number of units sold from beginning inventory and each purchase: 410 liters from March 1; 505 liters from March 3; 2,900 liters from March 10; 1,350 liters from March 20.

(2) FIFO

(3) LIFO

Homework Answers

Answer #1

1. Specific identification method

Cost of Ending Inventory = March 1 Inventory + March 3 Inventory + March 10 Inventory + March 20 Inventory

Cost of Ending Inventory = (1935 - 1000 - 410) * 0.58 + (2475 - 1330 - 505) * 0.63 + (3945 - 2900) * 0.70 + (2490 - 1350) * 0.78

Cost of Ending Inventory = $2328.40

2. FIFO

Cost of Ending Inventory = March 10 Inventory + March 20 Inventory

Cost of Ending Inventory = (3945 - 3085) * .70 + 2490 * .78

Cost of Ending Inventory = $2544.20

3. LIFO

Cost of Ending Inventory = March 1 Inventory + March 3 Inventory + March 10 Inventory

Cost of Ending Inventory = 1935 * 0.58 + 145 * 0.63 + 1270 * 0.70

Cost of Ending Inventory = $2102.65

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