Question

Sea Travel sells motor boats. One of Sea Travel’s most popular models is the Wing. During the current year, Sea Travel purchased 12 of these boats at the following costs:


On April 28, Sea Travel sold five Wings to the Jack Sport racing team. The remaining seven boats remained in inventory at June 30, the end of Sea Travel’s fiscal year.
Instructions
a. Compute the cost of goods sold relating to the sale on April 28 and the ending inventory of
Wing boats at June 30, using the following cost flow assumptions:
1. Average cost (round cost to nearest whole dollar).
2. FIFO.
3. LIFO.
Show the number of units and the unit costs of each layer comprising the ending inventory.
You may determine the cost of goods sold by deducting ending inventory from the cost of goods available for sale.
b. If Sea Travel uses the LIFO cost flow assumption for income tax purposes, can it use the FIFO method for financial reporting purposes?Explain.


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  • CreatedApril 17, 2014
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