Lauer Corporation has provided the following information about one of its laptop computers: Date Transaction Number of Units Cost per Unit 1/1 Beginning Inventory 100 $ 800 5/5 Purchase 200 $ 900 8/10 Purchase 300 $ 1,000 10/15 Purchase 200 $ 1,100 During the year, Lauer sold 750 laptop computers. What was cost of goods sold using the LIFO cost flow assumption

Lauer Corporation

The Cost of Goods Sold using the LIFO cost flow assumption is:

$740,000 ($780,000 - $40,000)

Explanation:

Date Transaction             Number of Units    Cost per Unit   Total

1/1      Beginning Inventory     100                   $ 800              $80,000

5/5    Purchase                      200                   $ 900               180,000

8/10   Purchase                      300                 $ 1,000              300,000

10/15 Purchase                      200                  $ 1,100              220,000

Year Total                              800                                          $780,000

Year  Sales                            750                                         $ 740,000

Year  Ending Inventory          50                   $ 800               $40,000

b) The Cost of goods sold ($740,000) is determined by subtracting the ending inventory ($40,000) from the cost of goods available for sale ($780,000).   Other method of determining the cost of goods sold under the LIFO cost flow assumption would be to add up the individual costs of purchases to the beginning inventory and then subtract ending inventory.  The LIFO cost flow assumption assumes that items sold are from the latest inventory and not the earlier ones.

Explanation:

November 5 - Purchase = 1100

Unit cost = $40

Payable = (1,100*40) 44000

November 7

Returns - 25 defective units = 25*40 =1000

Terms of sale = 5/10 , n/60

If invoices are paid within 10 days , a discount of 5% is given.

Therefore payment on November 15 attracts a discount of 5% of the net purchase

Journal entries

Date                      Description            Debit       Credit

November 5            Inventory            44,000

                          Accounts payable                      44,000

November 7        Accounts payable     1000

                                Inventory                                  1000

November 15    Accounts payable      43,000

                             Inventory (discount)                     2,150

                                  Cash                                        40,850