Sekhon Company had a beginning inventory on January 1 of 160 units of Product 4-18-19 at a cost of $20 per unit. During the year, the following purchases were made.
| Mar. 15 | 400 units at $23 | Sept. 4 | 330 units at $26 |
| July 20 | 250 units at $24 | Dec. 2 | 100 units at $29 |
1,000 units were sold. Sekhon Company uses a periodic inventory system
Instructions
- Determine the cost of goods available for sale
- Determine (1) the ending inventory, and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost). Prove the accuracy of the cost of goods under the FIFO and LIFO methods.
- Which cost flow method results in (1) the highest inventory amount for the balance sheet, and (2) the highest cost o goods sold for the income statement?
Solution
a.
Sekhon Company
b.
1.
FIFO Method
2.
LIFO Method
3.
Average Cost Method
c.
- FIFO shows the highest inventory amount for the balance sheet
- LIFO shows the highest cost of goods sold for the income statement.