Glee Distribution markets CDs of the performing artist Unique. At the beginning of October, Glee had in beginning inventory 2,000 of Unique's CDs with a unit cost of $7. During October, Glee made the following purchases of Unique's CDs.
|Oct. 3||2,500 @ $8||Oct. 19||3,000 @ $10|
|Oct. 9||3,500 @ $9||Oct. 25||4,000 @ $11|
During October, 10,900 units were sold, Glee uses a periodic inventory system.
- 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?
Average Cost Method
- FIFO shows the highest inventory amount for the balance sheet
- LIFO shows the highest cost of goods sold for the income statement.