Problem - Polar Inc. sells air conditioners. On January 1, 2012, they had 5,000 air conditioner units in inventory.
If Polar reported inventory on a FIFO basis, its beginning inventory balance would include the following:
Year units were purchased Number of units Cost per unit
2010 1,000 $500
2011 4,000 $600
If Polar reported inventory on a LIFO basis, its beginning inventory balance would include the following:
Year units were purchased Number of units Cost per unit
1998 2,000 $300
2002 3,000 $400
During 2012, Polar purchased 5,000 air conditioner units. Related costs were as follows:
Paid to supplier $3,500,000
Freight-in charges 100,000
Selling commissions 200,000
During 2012, Polar sold 6,000 air conditioner units at a price of $1,200 each. Polar uses a periodic inventory system.
a. Calculate Cost of Sales for 2012 if Polar, Inc. uses periodic LIFO to value inventory.
b. Calculate the balance in ending inventory on December 31, 2012 if Polar, Inc. uses periodic FIFO to value inventory.