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Company Ltd  had 116 units in beginning inventory at a total cost of NT$354,380

Accounting Nov 02, 2020

Company Ltd  had 116 units in beginning inventory at a total cost of NT$354,380. The company purchased 232 units at a total cost of NT$811,304. At the end of the year, Marigold had 87 units in ending inventory. Compute the cost of the ending inventory and the cost of goods sold under FIFO and average-cost. (Round average-cost per unit to 2 decimal places, e.g. 2.25 and final answers to O decimal places, e.g. NT$45.) FIFO Average-cost The cost of the ending inventory NT$ NT$ The cost of goods sold NT$ NT$ Which cost flow method would result in the higher net income? method would result in the higher net income. Which cost flow method would result in inventories approximating current cost in the statement of financial position? method would result in inventories approximating current cost in the statement of financial position. Which cost flow method would result in Marigold paying fewer taxes in the first year? method would result in Marigold paying lower taxes in the first year.

Expert Solution

  units per unit Cost units   Cost
Beginning inventory 116 3055 354380 116   354380
Purchases 232 3497 811304 232   811304
Total purchases 348   1165684 348 3349.667 1165684
             
             
Cost of sales 116 3055 354380 261 3349.667 874263
  145 3497 507065      
Tota cost of goods sold 261   861445 261   874263
             
Ending inventory 87 3497 304239 87 3349.667 291421
  FIFO Average cost
The cost of ending inventory 304239 291421
The cost of goods sold 861445 874263

FIFO method would result in higher net income [As COGS is comparatively lower]

FIFO method would result in inventories approximating current cost in the statement of financial position [as old inventories are sold only current inventories remain]

Weighted average cost method would result in marigold paying lower taxes in the first year [Cost of goods sold is higher and hence lower profit]

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