Faster Company uses the periodic inventory method and had the following inventory information available: Units Unit Cost Total Cost
1/1 Beginning Inventory 15 $8.00 $120
1/20 Purchase 60 $8.80 528
7/25 Purchase 30 $8.40 252
10/20 Purchase 45 $9.60 432
150 $1,332

a. Assume that the company uses the FIFO method. The value of the ending inventory at December 31 is $:
b. Assume that the company uses the average-cost method. The value of the ending inventory on December 31 is $:
c. Assume that the company uses the LIFO method. The value of the ending inventory on December 31 is $:

1. Determine the difference in the amount of income that the company would have reported if it had used the FIFO method instead of the LIFO method.
2. Would income have been greater or less?

Question Completion:

A physical count of inventory on December 31 revealed that there were 55 units on hand.

Faster Company

a. Assume that the company uses the FIFO method. The value of the ending inventory at December 31 is $:516

b. Assume that the company uses the average-cost method. The value of the ending inventory on December 31 is $:488.40

c. Assume that the company uses the LIFO method. The value of the ending inventory on December 31 is $:__472

1. The difference in the amount of income if it had used the FIFO method instead of the LIFO:

Cost of goods sold under FIFO =  $816

Cost of goods sold under LIFO = $860

Difference in income =                    $44

2. The income would have been greater by $44 because the FIFO charges less cost than the LIFO, especially when costs are rising.

Explanation:

a) Data and Calculations:

Faster uses the periodic inventory method.

Date                                     Units    Unit Cost   Total Cost

1/1        Beginning Inventory  15           $8.00          $120

1/20    Purchase                    60           $8.80           528

7/25   Purchase                    30           $8.40           252

10/20 Purchase                    45           $9.60           432

          Total                         150                            $1,332

Ending inventory                 55

Units of goods sold            95

Average cost = $1,332/150 = $8.88

Under FIFO:

Ending Inventory = 45*$9.60 + 10*$8.40 = $516

Cost of goods sold = Cost of goods available for sale minus the Ending Inventory = $1,332 - 516 = $816.

Under Average-Cost Method:

Ending Inventory = 55 * $8.88 = $488.40

Cost of goods sold = 95 * $8.88 = $843.60

Under LIFO method:

Ending Inventory = 15*$8.00 + 40*$8.80 = $472

Cost of goods sold = $860 ($1,332 - $472)

answer; ///i believe the correct answer is (350); (c) is your answer

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