Compare results for the cost flow assumptions

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Reference no: EM13531031

Morse Inc. is a retail company that uses the perpetual inventory method. All sales returns from customers result in the goods being returned to inventory. (Assume that the inventory is not damaged.) Assume that there are no credit transactions; all amounts are settled in cash. You have the following information for Morse Inc. for the month of January 2012.




Unit Cost or

Date

Description

Quantity

Selling Price

Jan-01

Beginning inventory

40

$13

Jan-05

Purchase

90

16

Jan-08

Sale

75

25

Jan-10

Sale return

10

25

Jan-15

Purchase

30

18

Jan-16

Purchase return

5

18

Jan-20

Sale

80

25

Jan-25

Purchase

20

21

Instructions

(a) For each of the following cost flow assumptions, calculate (i) cost of goods sold, (ii) ending inventory, and (iii) gross profit.

(1) LIFO. (Assume sales returns had a cost of $16 and purchase returns had a cost of $18.)

(2) FIFO. (Assume sales returns had a cost of $16 and purchase returns had a cost of $18.)

(3) Moving-average. (Round cost per unit to three decimal places.)

(b) Compare results for the three cost flow assumptions.

Reference no: EM13531031

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