PR 7-3A LIFO Periodic inventory by three methods
Artic Appliances uses the periodic inventory system. Details regarding the inventory of appliances at January 1, 2010, purchases invoices during the year, and the inventory count at December 31, 2010, are summarized as follows:
Inventory,
Purchases Invoices
Inventory Count,
Model January 1 1st 2nd 3rd December 31
BB900 27 at $213 21 at $215 18 at $222 18 at $225 30
C911 10 at 60 6 at 65 2 at 65 2 at 70 4
L100 6 at 305 3 at 310 3 at 316 4 at 317 4
N201 2 at 520 2 at 527 2 at 530 2 at 535 4
Q73 6 at 520 8 at 531 4 at 549 6 at 542 7
Z120 — 4 at 222 4 at 232 — 2
ZZRF 8 at 70 12 at 72 16 at 74 14 at 78 12
Instructions
1. Determine the cost of the inventory on December 31, 2010, by the first-in, first-out method. Present data in columnar form, using the following headings:
Model Quantity Unit Cost Total Cost
If the inventory of a particular model comprises one entire purchase plus a portion of another purchase acquired at a different unit cost, use a separate line for each purchase.
2. Determine the cost of the inventory on December 31, 2010, by the last-in, first-out method, following the procedures indicated in (1).
3. Determine the cost of the inventory on December 31, 2010, by the average cost method, using the columnar headings indicated in (1).
4. Discuss which method (FIFO or LIFO) would be preferred for income tax purposes in periods of (a) rising prices and (b) declining prices.
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