LTT had stock on hand on the 1st January 2018 of 100 heaters valued at $50 each.
The following transactions occurred during January:
Jan 7 bought 110 heaters at $52 each
15 sold 60 heaters at $80 each (selling price)
30 sold 70 heaters at $80 each (selling price)
REQUIRED:
a)Calculate cost of sales and closing stock at the end of the month from the above information using:
i)the FIFO method of valuation,
ii)the LIFO method of valuation, and
iii)the average cost method of valuation.
b)Prepare a statement of comprehensive income for the month ended 31 January under each method assuming no stock loss (use a columnar approach).
c)i)Which method produces the most favourable profit result for LTT?
ii)Comment on why the differences in profit have occurred under the 3 methods.

Question

Quizplus · Accepted Answer

The Answer of LTT had stock on hand on the 1st January 2018 of 100 heaters valued at $50 each.
The following transactions occurred during January:
Jan 7 bought 110 heaters at $52 each
15 sold 60 heaters at $80 each (selling price)
30 sold 70 heaters at $80 each (selling price)
REQUIRED:
a)Calculate cost of sales and closing stock at the end of the month from the above information using:
i)the FIFO method of valuation,
ii)the LIFO method of valuation, and
iii)the average cost method of valuation.
b)Prepare a statement of comprehensive income for the month ended 31 January under each method assuming no stock loss (use a columnar approach).
c)i)Which method produces the most favourable profit result for LTT?
ii)Comment on why the differences in profit have occurred under the 3 methods.

LTT Had Stock on Hand on the 1st January 2018