Asked by shawn christian on Jun 15, 2024
Verified
In the first month of operations Mordica Company made three purchases of merchandise in the following sequence: (1) 200 units at $6 (2) 300 units at $7 and (3) 400 units at $9. Assuming there are 300 units on hand compute the cost of the ending inventory under (1) the FIFO method and (2) the LIFO method. Mordica uses a periodic inventory system.
FIFO Method
A method of inventory costing that assumes the first goods purchased are the first goods sold, affecting the cost of goods sold and ending inventory valuation.
LIFO Method
An inventory management and valuation approach where the last items placed in inventory are the first ones sold.
- Acquire insight into the various techniques for inventory evaluation and their impact on financial documents.
- Understand the implications of LIFO and FIFO cost flow assumptions under GAAP and IFRS.
Verified Answer
TA
Torin AschleJun 16, 2024
Final Answer :
1. FIFO
300×$9=$2,700300 \times \$ 9 = \$ 2,700300×$9=$2,700
2. LIFO
200×$6=$1,200100×$7=700‾$1,900‾\begin{array} { l } 200 \times \$ 6 = \$ 1,200 \\100 \times \$ 7 = \underline { 700 }\\\quad\quad\quad\quad\quad \underline{ \$ 1,900 }\end{array}200×$6=$1,200100×$7=700$1,900
300×$9=$2,700300 \times \$ 9 = \$ 2,700300×$9=$2,700
2. LIFO
200×$6=$1,200100×$7=700‾$1,900‾\begin{array} { l } 200 \times \$ 6 = \$ 1,200 \\100 \times \$ 7 = \underline { 700 }\\\quad\quad\quad\quad\quad \underline{ \$ 1,900 }\end{array}200×$6=$1,200100×$7=700$1,900
Learning Objectives
- Acquire insight into the various techniques for inventory evaluation and their impact on financial documents.
- Understand the implications of LIFO and FIFO cost flow assumptions under GAAP and IFRS.
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