question archive Calculate ending inventory and cost of goods sold using FIFO and LIFO and adjust inventory using lower of cost and net realizable value The following information applies to the questions displayed below
Calculate ending inventory and cost of goods sold using FIFO and LIFO and adjust inventory using lower of cost and net realizable value The following information applies to the questions displayed below
Subject:FinancePrice:2.84 Bought6
Calculate ending inventory and cost of goods sold using FIFO and LIFO and adjust inventory using lower of cost and net realizable value
The following information applies to the questions displayed below.
For the current year: Parker games has the following inventory transactions related to its traditional board games. Parker Games uses a periodic inventory system.
Date Transaction Units unit cost total cost
Jan 1. Beginning inventory 110 $20 $2,200
Mar 12. Purchase 75 $15 $1,125
Sept 17. Purchase 45 $6 $360
230 $3,685
Jan 1. 1-Dec. 31 sales 155
Because of the increasing popularity of electronic video games, Parker Games continues to see a decline in the demand for board games. Sales prices have decreased 50% during the year. At the end of the year, Parker estimates, the net realizable value of 75 units of unsold inventory to be $350.
Part 1
1. Using FIFO calculate ending inventory and cost of goods sold
Ending inventory:
Cost of goods sold:
Part 2
2. Using LIFO calculate ending inventory and cost of good sold
Ending inventory:
Cost of goods sold:
Part 3
3-1
Determine the amount of ending inventory to report using lower of cost and net realizable value.
FIFO: lower of cost and RNV?
3-2. Record any necessary adjustment under FIFO ( if no entry is require for a transaction/ even select "no journal entry required" in the first account field)
Journal entry worksheet
1. Record the adjustment for inventory under FIFO.
Transaction general journal debit credit
December 31
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***There is a mistake in the question. Unit cost of Sept 17 purchase will be $8 not $6. Because if we multiply 45 units with $6, total cost is $270 and if we multiply 45 units with $8, total cost is $360. In the question total cost is $360. That's why I am considering $8 as unit cost.
***Firstly I am solving the question assuming unit cost $8 is correct. Then I am solving the question assuming unit cost $6 is correct.
If unit cost $8 is correct
Part 1
FIFO
Ending Inventory = $810
Cost of goods sold = $2,875
Part 2
LIFO
Ending inventory = $1,500
Cost of goods sold = $2,185
Part 3
3-1
Under FIFO method
Ending inventory using lower of cost and net realizable value = $350
3-2 Adjustment for inventory under FIFO
Date Account Titles and Explanation Ref Debit Credit
Dec. 31 Cost of Goods Sold 460
Inventory 460
(To adjust inventory to LCNRV*)
*LCNRV = Lower of cost and net realizable value
If unit cost $6 is correct
Part 1
FIFO
Ending Inventory = $720
Cost of goods sold = $2,875
Part 2
LIFO
Ending inventory = $1,500
Cost of goods sold = $2,095
Part 3
3-1
Under FIFO method
Ending inventory using lower of cost and net realizable value = $350
3-2 Adjustment for inventory under FIFO
Date Account Titles and Explanation Ref Debit Credit
Dec. 31 Cost of Goods Sold 370
Inventory 370
(To adjust inventory to LCNRV*)
*LCNRV = Lower of cost and net realizable value
Step-by-step explanation
If unit cost $8 is correct
Parker Games
Date Transaction Units Unit cost Total cost
Jan 1 Beginning inventory 110 $20 $2,200
Mar 12 Purchase 75 15 1,125
Sept 17 Purchase 45 8 360
Total units available for sale 230 3,685
Units sold 155
Units in ending inventory 75
Part 1
FIFO
Ending Inventory
Date Units Unit cost Total cost
Sept 17 45 $8 $360
Mar 12 30 15 450
Total 75 810
Cost of goods sold
Cost of goods available for sale $3,685
Less: Ending inventory (810)
Cost of goods sold $2,875
Part 2
LIFO
Ending Inventory
Date Units Unit cost Total cost
Jan. 1 75 $20 $1,500
Total 75 $1,500
Cost of goods sold
Cost of goods available for sale $3,685
Less: Ending inventory (1,500)
Cost of goods sold $2,185
Part 3
3-1
Under FIFO method
Ending inventory at cost = $810
Ending inventory at net realizable value = $350
Ending inventory at lower of cost and net realizable value = $350
3-2
Adjustment amount for journal entry
Cost of goods sold will increase by ($810-350) or $460
Inventory will decrease by ($810-350) or 460
If unit cost $6 is correct
Parker Games
Date Transaction Units Unit cost Total cost
Jan 1 Beginning inventory 110 $20 $2,200
Mar 12 Purchase 75 15 1,125
Sept 17 Purchase 45 6 270
Total units available for sale 230 3,595
Units sold 155
Units in ending inventory 75
Part 1
FIFO
Ending Inventory
Date Units Unit cost Total cost
Sept 17 45 $6 $270
Mar 12 30 15 450
Total 75 $720
Cost of goods sold
Cost of goods available for sale $3,595
Less: Ending inventory (720)
Cost of goods sold $2,875
Part 2
LIFO
Ending Inventory
Date Units Unit cost Total cost
Jan. 1 75 $20 $1,500
Total 75 $1,500
Cost of goods sold
Cost of goods available for sale $3,595
Less: Ending inventory (1,500)
Cost of goods sold $2,095
Part 3
3-1
Under FIFO method
Ending inventory at cost = $720
Ending inventory at net realizable value = $350
Ending inventory at lower of cost and net realizable value = $350
3-2
Adjustment amount for journal entry
Cost of goods sold will increase by ($720-350) or $370
Inventory will decrease by ($720-350) or $370
