Omega Sales uses the Internet to sell high-quality cookware for $350 per set. All cookware sets are purchased from Galaxy Wares for cash. On March 1, Omega had 20 sets of cookware in inventory that cost $110 each. The following transactions occurred in March 2009.
Mar. 1 Purchased 15 sets of cookware at a cost of $105 each.
Mar. 8 Sold 13 sets of cookware.
Mar. 9 Purchased 10 sets of cookware at a cost of $103.
Mar. 13 Sold 16 sets of cookware.
Mar. 16 Purchased 10 sets of cookware at a cost of $102.
Mar. 21 Sold 19 sets of cookware.
Mar. 23 Purchased 15 sets of cookware at a cost of $95.
Mar. 31 Sold 14 sets of cookware.
Required:
(a) Record the March journal entries for Omega Sales, assuming the company uses LIFO.
(b) Prepare a partial income statement (through gross profit) for Omega Sales for March.
(c) What ending inventory balance would Omega show on its balance sheet?
(d) What would be the balances of Cost of Goods Sold and ending inventory if Omega used FIFO?
(e) Assuming LIFO, apply the lower-of-cost-or-market rule on March 31 stands make the appropriate journal entry. How does the fact that cookware prices are declining affect your answer? Would your answer change (and, if so, by how much?) if Omega used FIFO?
(f) Explain why Omega might choose to omit the LCM adjustment.