Holliday Company's inventory records show the following data: Units Unit Cost Inventory, January...


Holliday Company's inventory records show the following data:

Date Activity Units Unit Cost
January 1 Inventory 5,000 $11.00
June 18 Purchases 4,500 9.00
November 8 Purchases 3,000 3.00

A physical inventory on December 31 shows 2,000 units on hand.

Holliday sells the units for $19.00 each.

The company has an effective tax rate of 20%.

Holliday uses the periodic inventory method.


Under the LIFO method, the cost of goods sold is:

a) $82,500.

b) $98,500.

c) $22,000.

d) $84,500.

Cost of Goods Sold:

Cost of goods sold (COGS) is cost incurred for the manufacture of the products that the company sold during a given period of time. Thus only those costs which are incurred directly in relation to the manufacture or acquisition of products which the company sold during the given period of time alone are considered. Instances of costs incurred include direct material, direct labour, direct expenses, factory overheads, etc., It is computed as Opening Inventory + Purchases / Production made during the year - Closing Inventory. Cost of goods sold is reduced from sales income to get gross profit and hence is an important metric. The cost of goods sold does not include indirect expenses such as administrative expenses, sales and distribution expenses, etc.,

Answer and Explanation: 1

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The Cost of goods sold is (b) $98,500

Opening Stock 5,000 $11 $55,000
Add: Purchases 4,500 $9 $40,500
Add: Purchases 3,000 $3 $9,000
Cost of goods...

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Perpetual and Periodic Inventory Systems


Chapter 6 / Lesson 5

Explore the differences between perpetual and periodic inventory systems. Learn the definitions of perpetual and periodic inventory systems and find their uses.

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