Accounting (Inventory)

1. INVENTORY A in X

The inventory of Product A and data on purchases and sales for a two-month period in
Company X follow. Company X closes its books at the end of each month. It uses a periodic inventory system.

Apr. 1
10
17
30

Beginning inventory
Purchase
Sale
Ending inventory

50 units
100 units
90 units
60 units

@€204
@€220

May 2
14
22
30
31

Purchase
Purchase
Purchase
Sale
Ending inventory

100 units
50 units
60 units
200 units
70 units

@€216
@€224
@€234

Required:
a) Compute the cost of ending inventory of Product A on April 30 and May 31 using the average-cost method. In addition, determine cost of goods sold for
April and May. Round unit costs to cents and totals to euros.
b) Compute the cost of the ending inventory on April 30 and May 31 using the
FIFO method. In addition, determine cost of goods sold for April and May.
c) Compute the cost of the ending inventory on April 30 and May 31 using the
LIFO method. In addition, determine cost of goods sold for April and May.
d) Do X´s cash flows from operations for April and May differ depending on which inventory costing method is used? Explain.

2. INVENTORY METHODS

a) A company decided to change its inventory valuation from FIFO to weighted average in a period of rising prices. What was the result of the change in the year of the change on

1) Ending inventory ? (Increase? Decrease? No change?)

2) Net income ? (Increase? Decrease? No change?)

b) Which inventory costing method (i.e. LIFO vs FIFO vs weighted average method) approximates most closely the current replacement cost for
1) Cost of goods sold ?  ……………………..

2) Ending Inventory ?  …………………….

c) “During periods of inflation, a perpetual inventory system would result in the same dollar amount of ending inventory as a periodic inventory system”. 1) Is this true for FIFO? (Yes/No)

2) Is this true for LIFO? (Yes/No)

3. HAMLETIAN INC.
Hamletian Inc. manufactures