Inventories

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. 15400 units at $23Sept. 4330 units at $26
July 20250 units at $24Dec. 2100 units at $29

1,000 units were sold. Sekhon Company uses a periodic inventory system

Instructions

  1. Determine the cost of goods available for sale
  2. 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.
  3. 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.
  1. FIFO shows the highest inventory amount for the balance sheet
  2. LIFO shows the highest cost of goods sold for the income statement.
 
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