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Determine the amounts for COGS on the income statement and the ending inventory (at cost) on the balance sheet given the following inventory purchase and sale information of Orange Corporation. Assume a perpetual inventory system.

Beginning Inventory 100 units @ $30
2/10/13 Purchase 200 units @ $35
4/15/13 Purchase 300 units @ $40
6/18/13 Purchase 250 units @ $45
9/22/13 Purchase 125 units @ $50

Sales:

3/1/13 Sale 250 units
4/30/13 Sale 100 units
8/2/13 Sale 325 units

1) Determine COGS and Ending Inventory (at cost) under FIFO perpetual
2) Determine COGS and Ending Inventory (at cost) under LIFO perpetual
3) Determine COGS and Ending Inventory (at cost) under Moving Average

Extra Problems (Using the information above):

1) Assume Orange Corporation uses FIFO perpetual for internal accounting purposes throughout the year, but reports using LIFO perpetual for external reporting. Assume a zero ($0) balance in the Allowance to reduce inventory to LIFO at the beginning of the year. What is the journal entry needed to establish the LIFO reserve for Orange Corporation?

2) Assuming Orange Corporation reports using perpetual LIFO, apply the Lower of Cost or Market (LCM) rules to determine what value Orange Corporation should report in its 12/31/13 financial statements for ending inventory. Replacement costs for the inventory at 12/31/13 are $11,000; the projected selling price for the inventory on hand at 12/31/13 is $15,000 with estimated selling related costs of $2,000. Orange Corporation estimates a 10% gross profit percentage on sales.

Hint: find out the following values and then apply the LCM rules to determine the value that should be reported for ending inventory on Orange Corporation's 12/31/13 balance sheet:

 

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M947329

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