FIFO and LIFO Calculations

Calculate the cost of goods sold using FIFO method given the following data: Beginning inventory - 100 units at $10 per unit, Purchases - 200 units at $12 per unit, Sales - 250 units.

• $2,400

• $2,000

• $3,500

• $2,800

Calculate the cost of goods sold using LIFO method given the following data: Beginning inventory - 100 units at $8 per unit, Purchases - 200 units at $10 per unit, Sales - 250 units.

• The cost of goods sold using LIFO method is $1,900.

• The cost of goods sold using LIFO method is $2,500.

• The cost of goods sold using LIFO method is $2,000.

• The cost of goods sold using LIFO method is $2,400.

Compare the results of FIFO and LIFO cost of goods sold calculations in the above scenarios. What do you observe?

• The results of FIFO and LIFO cost of goods sold calculations are always the same

• FIFO and LIFO cost of goods sold calculations are only used for tax purposes

• FIFO and LIFO cost of goods sold calculations have no impact on financial statements

• The results of FIFO and LIFO cost of goods sold calculations will vary depending on the cost of inventory items and the timing of sales.

Explain how inflation affects the cost of goods sold under FIFO method.

• Inflation decreases the cost of goods sold under FIFO method.

• Inflation increases the cost of goods sold under FIFO method.

• Inflation has no impact on the cost of goods sold under FIFO method.

• Inflation only affects the selling price, not the cost of goods sold under FIFO method.

Explain how inflation affects the cost of goods sold under LIFO method.

• LIFO method assumes that the oldest inventory items purchased are sold first, so inflation decreases the cost of goods sold.

• LIFO method assumes that the most recent inventory items purchased are sold first, so inflation increases the cost of goods sold.

• Inflation has no impact on the cost of goods sold under LIFO method.

• Under LIFO method, inflation causes the cost of goods sold to remain constant.

Calculate the ending inventory using FIFO method given the following data: Beginning inventory - 100 units at $5 per unit, Purchases - 200 units at $6 per unit, Sales - 150 units.

• The ending inventory is 50 units at $6 per unit.

• The ending inventory is 100 units at $5 per unit.

• The ending inventory is 150 units at $6 per unit.

• The ending inventory is 200 units at $6 per unit.

Calculate the ending inventory using LIFO method given the following data: Beginning inventory - 100 units at $7 per unit, Purchases - 200 units at $8 per unit, Sales - 150 units.

• Ending inventory is $1,100

• Ending inventory is $1,000

• Ending inventory is $1,300

• Ending inventory is $1,500

Discuss the advantages and disadvantages of using FIFO method in a period of rising prices.

• Higher cost of goods sold and lower reported profits, but higher taxable income and higher cash flow

• Higher cost of goods sold and lower reported profits, but lower taxable income and higher cash flow

• No impact on cost of goods sold and profits, but higher taxable income and lower cash flow

• Lower cost of goods sold and higher reported profits, but higher taxable income and lower cash flow

Discuss the advantages and disadvantages of using LIFO method in a period of rising prices.

• The advantages include higher ending inventory values, while the disadvantages include higher taxable income.

• The advantages include potential mismatch with current market value, while the disadvantages include higher ending inventory values.

• The advantages include potential mismatch with current market value, while the disadvantages include higher taxable income.

• The advantages include lower taxable income, while the disadvantages include lower ending inventory values and potential mismatch with current market value.

Explain how the choice between FIFO and LIFO methods can impact a company's financial statements and tax liabilities.

• The choice between FIFO and LIFO methods can impact a company's financial statements and tax liabilities by affecting the cost of goods sold, net income, and taxes paid.

• The choice between FIFO and LIFO methods affects the company's marketing strategy

• The choice between FIFO and LIFO methods only impacts employee salaries

• The choice between FIFO and LIFO methods has no impact on financial statements or tax liabilities