Exercise 8: Shania Twain Company Formation On December 12

Exercise 8 15shania Twain Company Was Formed On December 1 2013 The

Shania Twain Company was formed on December 1, 2013. The problem provides inventory transactions for Product BAP, including units purchased at different dates and costs, as well as a physical inventory count on March 31, 2014. The task involves preparing schedules to calculate the ending inventory using FIFO, LIFO, and weighted-average inventory methods. To complete this, the student should organize purchase and inventory data, apply the respective inventory valuation techniques, and compute the ending inventory values Round answers to the specified decimal places. Additionally, the problem asks for the calculation of the average-cost per unit for the period, considering all available inventory data.

Paper For Above instruction

In the realm of inventory management and financial reporting, accurately calculating the ending inventory is crucial for reflecting a company's financial position. The problem at hand involves applying three different inventory valuation methods—FIFO (First-In, First-Out), LIFO (Last-In, First-Out), and weighted-average—to determine the ending inventory as of March 31, 2014, for Shania Twain Company's Product BAP.

Beginning with FIFO, this method assumes that the oldest inventory items are sold first, leaving the newest inventory on hand at the end of the period. To apply FIFO, one begins with the units from beginning inventory and purchase transactions, allocating units in chronological order until reaching the physical count of 1,600 units on hand. For example, if the beginning inventory was 600 units at $8 each, and subsequent purchases added to inventory, then the ending inventory includes the most recent purchases, valued at their respective unit costs.

Conversely, the LIFO method assumes that the most recently purchased inventory is sold first, leaving the oldest inventory on hand. Under LIFO, the calculation begins with the latest purchase and works backwards until the count of 1,600 units is achieved, assigning unit costs accordingly. This method often results in a lower ending inventory value during periods of rising prices, due to the higher costs of recent purchases being expensed first.

The weighted-average method involves calculating an average cost per unit by dividing the total cost of all inventory units available for sale during the period by the total number of units. This average cost is then multiplied by the units on hand at period-end to determine ending inventory value. The formula considers all purchase and beginning inventory costs, smoothing out price fluctuations over the period.

Applying these methods requires meticulous organization of the inventory data. For FIFO, the student should start with the earliest units and assign costs accordingly; for LIFO, begin with the latest units. For the weighted-average, sum all costs and divide by total units. After performing each calculation, the student should round the results to zero decimal places, as specified.

Calculating the average-cost per unit also involves total cost divided by total units, rounded to two decimal places for precision. This average cost aids in understanding the overall valuation of inventory during the given period. The comprehensive understanding of these methodologies enables accurate financial reporting and inventory management, aligning with accounting standards.

References

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  • accountants.org. (2023). Financial Accounting Standards Board (FASB). Generally Accepted Accounting Principles (GAAP). Retrieved from https://www.fasb.org
  • International Financial Reporting Standards (IFRS). (2023). IFRS Foundation. Retrieved from https://www.ifrs.org

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