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Solution To Assignment Ch6

The document presents solutions to a Chapter 6 accounting assignment for Elsa's Boards, detailing the periodic inventory methods FIFO and LIFO for Xpert snowboards. It includes calculations for ending inventory and cost of goods sold, showing that FIFO results in a higher ending inventory and lower COGS compared to LIFO. Both methods yield the same total for ending inventory and COGS at $14,442, highlighting differences in financial reporting and tax implications.

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95 views3 pages

Solution To Assignment Ch6

The document presents solutions to a Chapter 6 accounting assignment for Elsa's Boards, detailing the periodic inventory methods FIFO and LIFO for Xpert snowboards. It includes calculations for ending inventory and cost of goods sold, showing that FIFO results in a higher ending inventory and lower COGS compared to LIFO. Both methods yield the same total for ending inventory and COGS at $14,442, highlighting differences in financial reporting and tax implications.

Uploaded by

kingpowellalexander
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Name: AbduMalik Salami

Course: Principles of Accounting BTA 111


Instructor Name: Angela Wu
Solutions to Chapter 6 Assignment

Ch6 Exercises: Periodic Inventory Methods


1. Elsa’s Boards sells a snowboard, Xpert, that is popular with snowboard enthusiasts. Information
relating to Elsa’s purchases of Xpert snowboards during September is shown below. During the same
month, 121 Xpert snowboards were sold. Elsa’s uses a periodic inventory system.
Date Explanation Units Unit Cost Total Cost
Sept. 1 Inventory 26 $ 97 $2,522
Sept. 12 Purchases 45 102 4,590
Sept. 19 Purchases 20 104 2,080
Sept. 26 Purchases 50 105 5,250
Totals 141 $14,442
Instructions
(a) Compute the ending inventory at September 30 and cost of goods sold using the FIFO and LIFO
methods. Prove the amount allocated to cost of goods sold under each method.
(b) For both FIFO and LIFO, calculate the sum of ending inventory and cost of goods sold. What do you
notice about the answers you found for each method?

Solution
FIFO
Using FIFO Method
Elsa’s Boards
Xpert snowboards
Unit Cost Total Cost
Date Explanation Units $ $
1-Sep Beginning Inventory 26 97 2,522
12-Sep Purchase 45 102 4,590
19-Sep Purchase 20 104 2,080
26-Sep Purchase 50 105 5,250
Total units available for sale 141 14,442
Units in ending inventory 20
Units sold 121
Using FIFO Method
Elsa’s Boards
Step 1: Ending Inventory
Unit Cost Total Cost Step 2: Cost of goods sold
Date Units
$ $
26-Sep 20 105 2,100 Cost of goods available for sales $ 14,442
Total 20 2,100 Less: Ending inventory $ 2,100
Cost of goods sold $ 12,342

LIFO
Using LIFO Method
Elsa’s Boards
Xpert snowboards
Unit Cost Total Cost
Date Explanation Units $ $
1-Sep Beginning Inventory 26 97 2,522
12-Sep Purchase 45 102 4,590
19-Sep Purchase 20 104 2,080
26-Sep Purchase 50 105 5,250
Total units available for sale 141 14,442
Units in ending inventory 20
Units sold 121

Using LIFO Method

Elsa’s Boards
Step 1: Ending Inventory
Unit Cost Total Cost Step 2: Cost of goods sold
Date Units
$ $
1-Sep 20 97 1,940 Cost of goods available for sales $ 14,442
Total 20 1,940 Less: Ending inventory $ 1,940
Cost of goods sold $ 12,502
At September 30
Method Ending Inventory COGS Sum (Ending Inventory + COGS)
FIFO $ 2,100 $ 12,342 $ 14,442
LIFO $ 1,940 $ 12,502 $ 14,442

Observations:
• FIFO results in a higher ending inventory and a lower COGS.

• LIFO results in a lower ending inventory and a higher COGS.

• The sum of the ending inventory and COGS remains the same for both methods

($14,442).

• FIFO is more reflective of actual physical inventory movement, while LIFO reduces

taxable income in times of rising prices.

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