On December 1, Novak Corp. has three DVD players left in stock. All are identical, all are priced to sell at $181. One of the three DVD players left in stock, with serial#1012, was purchased on June 1 at a cost of $40. Another, with serial #1045, was purchased on November 1 for $34. The last player, serial #1056, was purchased on November 30 for $33.

(a) Calculate the cost of goods sold using the FIFO periodic inventory method assuming that two of the three players were sold by the end of December, Discount Electronics' year-end.

(b) If Discount Electronics used the specific identification method instead of the FIFO method, what would Bargain's cost of goods sold be if the company wished to minimize earnings?

Question

Ashlyn

Business

30 March, 10:44

On December 1, Novak Corp. has three DVD players left in stock. All are identical, all are priced to sell at $181. One of the three DVD players left in stock, with serial#1012, was purchased on June 1 at a cost of $40. Another, with serial #1045, was purchased on November 1 for $34. The last player, serial #1056, was purchased on November 30 for $33.

(a) Calculate the cost of goods sold using the FIFO periodic inventory method assuming that two of the three players were sold by the end of December, Discount Electronics' year-end.

(b) If Discount Electronics used the specific identification method instead of the FIFO method, what would Bargain's cost of goods sold be if the company wished to minimize earnings?

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Answers (1)

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Jaylin Walls · Answer 1

Novak Corp.

a) Calculation of the cost of goods sold using FIFO:

serial#1012 June 1 $40

serial #1045 November 1 $34

Total cost of goods sold $74

b) Calculation of the cost of goods sold under Specific Identification to minimize earnings:

serial#1012 June 1 $40

serial #1045 November 1 $34

Total cost of goods sold $74

Explanation:

a) Inventory Summary:

Serial No. Purchase Date Unit Cost

serial#1012 June 1 $40

serial #1045 November 1 $34

serial #1056 November 30 $33

b) For specification identification and in order to minimize earnings, the company would choose report on products with higher costs.