Problem 3. Inventory Cost Flow Assumption: FIFO, LIFO, Average Cost; Periodic & Perpetual Methods (2.1 content area)

Inventory information for UMPI Corporation discloses the following information for the month of June.

June 1 Balance 450 units @ $11 June 15 Sold 200 units @ $24

11 Purchased 950 units @ $13 15 Sold 575 units @ $25

20 Purchased 525 units @ $14 27 Sold 324 units @ $27

Instructions

3.1thru3 Assuming that the periodic inventory method is used, compute the cost of goods sold and ending inventory under (1) LIFO, (2) FIFO, (3) Average Cost.

3.4thru6 Assuming that the perpetual inventory method is used and costs are computed at the time of each withdrawal, what is the cost of goods sold and ending inventory under (4) LIFO, (5) FIFO, (6) Average Cost.

3.7 Prepare the adjusting journal entries to record cost of goods sold for the month of June for the perpetual inventory method only.

3.8 Explain why LIFO usually produces a lower gross profit than FIFO.