Question

Orion Iron Corp. tracks the number of units purchased and sold throughout each year but applies its inventory costing method at the end of the year, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31, 2012.
Transactions Units Unit
Cost
a. Inventory, December 31, 2011 500 $ 10
For the year 2012:
b. Purchase, April 11 800 8
c. Purchase, June 1 700 12
d. Sale, May 1 (sold for $38 per unit) 500
e. Sale, July 3 (sold for $38 per unit) 520
f. Operating expenses (excluding income tax expense), $19,000
Required:
1. Calculate the number and cost of goods available for sale.
2. Calculate the number of units in ending inventory.
3. Compute the cost of ending inventory and cost of goods sold under (a) FIFO, (b) LIFO, and (c) weighted average cost. (Do not round intermediate calculations. Round your final answers to the nearest dollar amount.)
4. Prepare an Income Statement that shows 2012 amounts under the FIFO method, LIFO method and weighted average method.

Answer 1

Answer:

Explanation:

                                 Sales     Purchase

   Transaction            unit             Unit     Unit cost   Total

Opening inventory                        500        10            5000

April 11                                             800        8             6,400

June 1                                              700        12            8,400

May 1                         500                              38

July 3                         520                             38

Operating expenses = $19,000

1)Number of goods available = 2000

Cost of goods available = $19,800    

2)    Number of units in ending inventory

= Opening inventory + purchase - sales      

1500-1020= 480

3)                                                    COST(FIFO)

                                  Ending inventory           Goods sold

May 1                                                               500*10 = 5000

July 3                                                               520* 8 =  4,160

                                  280 * 8 = 2240

                                   700*12 = 8,400

Total                                           10,640                           9,160

                                                 

                                                     COST (LIFO)

May 1                                                                        500 * 12 = 6000

July 3                                                                        200*12 =   2400

                                                                                  320* 8 =   2560

                                         480*8 = 3,840

                                          500*10 = 5000

Total                                                   8,840                             10,960

Weighted average cost

19800/2000 =9.9                  480*9.9 = 4,752              1020*9.9=10,098

sales revenue = (500+520)* 38 =$38760

                                   

                                                    Income statement

                                            FIFO                LIFO        WEIGHTED AV

 Sales                              38,760              38,760         38,760

Cost of goods                  9,160                  10,960         10,098    

Gross profit                       29,600               27,800        28,662  

Operating expenses       19,000                 19,000         19,000

PBIT                                  10,600                  8,800          9,662