Determine the cost of goods sold and ending inventory amount

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Reference no: EM13977299

Spice, Inc., began October with 100 shirts that cost $76 each. During October, the store made the following purchases at cost: 

Spice sold 500 shirts and ended October with 130 shirts. The sale price of each shirt was $130.

Oct. 3

200 @ $81

=

16200

12

90 @ 82

=

7380

24

240 @ 85

=

20400

Required

1. Determine the cost of goods sold and ending inventory amounts by the average, FIFO, and LIFO cost methods. Round average cost per unit to 3 decimal places, and round all other amounts to the nearest dollar.

2. Explain why cost of goods sold is highest under LIFO. Be specific. 3.

Prepare Spice's income statement for October. Report gross profit. Operating expenses totaled $10,000. Spice uses the LIFO method for inventory. The income tax rate is 40%.

Inventory

Jan. 1

Balance

300 cases @ $300

121,500

   

100 cases @ 315

 

May 19

Purchase

600 cases @ 335

201,000

Aug.12

Purchase

400 cases @ 350

140,000

Oct.4

Purchase

700 cases @ 370

259,000

Sales Revenue

Dec. 31

1,800 cases

910,000

 

 

 

Required

1. Prepare a partial income statement through gross profit under the average, FIFO, and LIFO cost methods. Round average cost per unit to 4 decimal places and all other amounts to the nearest dollar.

2. Which inventory method would you use to report the highest net income? Explain why this method produces the highest reported income.

Reference no: EM13977299

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