Reference no: EM131749137

Question: Merchandising businesses no longer have to determine Ending inventory and Cost of Goods Sold valuations manually. However, within modern accounting software, and equivalent process occurs.

1. Inventory purchases and sales are tailed.

2. Costs are applied using FIFO, LIFO, or Weighted Average cost flow assumptions

3. Ending Inventory & COGS amounts are calculated

4. Gross Profit & Gross Profit Rates are calculated

To help you understanding processes, this assignment requires you to enter Inventory-related items and calculate the FIFO, LIFO and Weighted-Average Ending Inventory & COGS valuationsand calculate the Gross Profit and Gross Profit Rates for each approach. Use the following fact pattern to complete the appropriate tabs in the A1 Workbook, posted on Blackboard.

C. Lu Company had a beginning inventory of 400 Units of Item 1 (the only product sold by the company), at a cost of $8 per unit. During the year, purchases were :

Feb. 20           600 units at $9

May. 5            500 units at $10

Aug. 12          300 units at $11

Dec. 8            200 units at $12

Lu company uses a periodic inventory system.

Sales totaled 1,500 units.

1. Enter the purchase data necessary to Goods Available for Sale section of the worksheet.

2. Enter the appropriate amounts to calculate Ending Inventory and COGS under each of the assumed cost flow methods (FIFO, LIFO, and Average)

3. Determine and enter in cells G52 and G55 which cost flow method results in:

3.1 the lowest Ending Inventory amount for the Balance Sheet (Cell G52)

3.2 the lowest COGS for the income statement (Cell G55)

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