The records of the Newman Trading Corporation show the following data about item A. The selling price was $15 per unit throughout the year.
|
Purchased |
Sold |
Balance in Inventory |
||||||||
|
Date |
Units |
Unit cost |
Total $ |
Units |
Unit cost |
Total $ |
Units |
Unit cost |
Total $ |
|
|
Jan. 1 |
200 |
$10 |
||||||||
| 12 |
100 |
$11 |
||||||||
|
Feb. 1 |
200 |
|||||||||
|
Apr. 16 |
200 |
$12 |
||||||||
|
May 1 |
100 |
|||||||||
|
July 15 |
100 |
$14 |
||||||||
|
Nov. 10 |
100 |
|||||||||
|
Dec. 5 |
200 |
$17 |
||||||||
Required:
- Calculate the cost of the ending inventory under the FIFO method when a perpetual inventory system is followed.
- Calculate the cost of the ending inventory under the specific identification method when perpetual inventory records are maintained. Assume newest units are sold first.
- The company has experienced a period of rapidly rising prices for its purchases during the year. If selling price has remained fairly constant during this period because of heavy
competition in the marketplace, what effect will result from the use of FIFO, as compared to specific identification, on
- the income statement
- the balance sheet.
- Assume that the February 1 sale was on credit to customer B, perpetual inventory records were maintained, and the specific identification method was used. Prepare the required journal entries to record sales and cost of goods sold on February 1.
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