As a trainee accountant, you have been asked to determine the monetary value that should be assigned to the inventory of sporting equipment on hand as at the end of the financial year for Sportit Ltd. You are currently looking at stocks
of a training shoe that is very popular. The number of pairs of shoes on hand at the start of the accounting period was 100, and these had a monetary value of $7000 assigned to them. During the year, a further 1200 pairs of the training shoe were purchased and, at the end of the year, a stocktake revealed that there were 80 pairs unsold. The purchases were made throughout the year. Five hundred pairs of shoes were purchased at a unit price of $75, a further 500 pairs of shoes at a unit price of $80 and a further 200 pairs at a price of $82.
a. Differentiate the cost assigned to inventory of raining shoes using the (1) FIFO and (2) weighted average cost assignment methods.
b. LIFO is a permitted cost assignment method in the US but is not permitted under IFRSs. Compare the effect on assets and profits if LIFO was used rather than FIFO in times of rising cost prices.