Retail Corp began operations in January of 2015

| March 31, 2017

Question

Retail Corp began operations in January of 2015. The CFO, Delores Johnson, wants to consider the impact of different accounting methods available under GAAP on the firm’s operations and financial statements.

Your task is to write a memo to Ms. Johnson that explains the differences between LIFO, FIFO, and Average Cost inventory cost flow assumptions. You should discuss the effect these methods have on:

1. Income Statement – in particular Cost of goods sold and net income

2. Balance Sheet – Inventory valuation

In order to facilitate your discussion, I have generated the following assumed inventory transactions.

Units Available for Sale

6/1 Beg. Inventory 250 units @ $ 5

6/8 Purchase No. 1 500 units @ $ 6

6/19 Purchase No. 2 300 units @ $ 8

Units Sold

6/20 Sale No. 1 500 units @ $12

6/25 Sale No. 2 200 units @ $12

In addition attach a separate sheet that shows your calculations in support of the memo. Your memo should be no longer than one page, size 12 font, 1.15 spacing (the default spacing for Microsoft Word). Make sure to use proper memo format (on the next page). This assignment should be handed in no later than November 23, 2015, in class.No late assignments will be accepted.

To:
Ms. Johnson, CFO

From:
[Your Name]

Date:
[Click to select date]

Subject:
Accounting for Cost of goods sold under different cost flow assumptions

Management’s Proposed Accounting

Discussion of Impact of Management’s Proposed Accounting

Conclusion and Recommendation

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