AC1420: Week 3 Inventory Accounting Every month

| March 29, 2017

Question
Every month, a local auto parts store purchases stainless steel cylinder head gaskets directly from the manufacturer. The price that the local auto parts store pays is adjusted monthly due to the high volatility of steel prices.

Beginning inventory January 1st: 500 units at a price of $20

Purchases in January: 100 units at a price of $22

Purchases in February: 225 units at a price of $24.50

Purchases in March: 200 units at a price of $21

At the end of each quarter, the store performs a physical inventory count.

When the current physical inventory count was performed on March 31st, 327 stainless steel cylinder head gaskets were counted.

Task 1: Calculate the ending inventory value using the First-in, first-out (FIFO) and Last-in, first-out (LIFO) methods assuming a periodic record keeping method.

Task 2: Calculate Sales, Cost of Goods Sold, and Gross Margin for each inventory valuation method assuming that the sale price from the local auto parts store to the end customer is $43 per gasket.

Make sure you explain how you arrive at your solution.

Submission Requirements:

Submit your answers in a Microsoft (MS) Word file.

Font: Arial, 12 point, double-spaced

AC1420: Week 3 Inventory Accounting
Every month, a local auto parts store purchases stainless steel cylinder head gaskets
directly from the manufacturer. The price that the local auto parts store pays is adjusted
monthly due to the high volatility of steel prices.
Beginning inventory January 1st:

500 units at a price of $20

Purchases in January:

100 units at a price of $22

Purchases in February:

225 units at a price of $24.50

Purchases in March:

200 units at a price of $21

At the end of each quarter, the store performs a physical inventory count.
When the current physical inventory count was performed on March 31st, 327 stainless
steel cylinder head gaskets were counted.
Task 1: Calculate the ending inventory value using the First-in, first-out (FIFO) and
Last-in, first-out (LIFO) methods assuming a periodic record keeping method.
Task 2: Calculate Sales, Cost of Goods Sold, and Gross Margin for each inventory
valuation method assuming that the sale price from the local auto parts store to the end
customer is $43 per gasket.
Make sure you explain how you arrive at your solution.
Submission Requirements:
Submit your answers in a Microsoft (MS) Word file.
Font: Arial, 12 point, double-spaced
Evaluation Criteria:
Criteria

Points Assigned

Did you solve task 1 correctly?

50%

Did you solve task 2 correctly?

Points Earned

50%

Page 1

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