Accounting -Key Assignment Draft Brian Miller is an entrepreneur

| January 31, 2017

Question
ACCT300-1402A-01 Intermediate Accounting I
TaskName: Phase 4 Individual Project
Deliverable Length: 2–3 pages showing all calculations; 2 pages showing all calculations
Details:
Weekly tasks or assignments (Individual or Group Projects) will be due by Monday and late submissions will be assigned a late penalty in accordance with the late penalty policy found in the syllabus. NOTE: All submission posting times are based on midnight Central Time.

Key Assignment Draft

Brian Miller is an entrepreneur. He started a small-town friendly grocery store. People stopped by his store to pick up things they did not want to run to the regular grocery store for. In 3 years, because of popular demand, he started adding more items on his shelf and pretty soon, he had grown into a regular grocery store. People loved his store because he knew everyone by their first name and would try to fulfill everyone’s requests. He now needs some help with his inventory. He hired a CPA firm that would give him some advice on how he should maintain his inventory.

You are his CPA. You want to give Brian an overview on the inventory system, some different methods of recording cost of goods sold, and educate him on the accounting side of recording inventory and recording cost of goods sold.

Part 1

Explain to Brian the perpetual and periodic inventory systems, covering the main differences between the two systems, and why companies use perpetual inventory system.
Contrast the 4 methods of recording cost of goods sold:
Specific identification
Average cost
First in, First out (FIFO)
Last in, Last out (LIFO)
ABC, a grocery company, uses a periodic inventory system. They have the following information for the month of January:
Beginning inventory

Jan 1: 400 units @ $10 each

Purchases

Jan 10: 300 units @$12 each

Jan 15: 200 units @$15 each

Sales

Jan 5: 200 units @ $15 each

Jan 12: 200 units @ $20 each

Jan 18: 100 units @ $25 each

Ending inventory

Jan 31: 400 units

Will LIFO or FIFO generate the highest cost of goods sold? Why? Show all calculations.
Will the ending inventory balance will be higher under LIFO or FIFO? Why? Show all calculations.
What is the cost of goods sold under LIFO? Show all calculations.
What is the cost of goods sold under FIFO? Show all calculations.

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