Stengel Company Sells a Snowboard, White-Out, That Is Popular with Snowboard

question 29

Essay

Stengel Company sells a snowboard, White-Out, that is popular with snowboard enthusiasts. Presented below is information relating to Stengel Company's purchases of White-Out snowboards during September. During the same month, 124 White-Out snowboards were sold at $160 each. Stengel Company uses a periodic inventory system. Instructions
(a) Compute the ending inventory at September 30 and cost of goods sold using the FIFO and LIFO method. Prove the amount allocated to cost of goods sold under each method.
(b) For both FIFO and LIFO, calculate the sum of inventory and cost of goods sold. What do you notice about the answer you found for each method?
(c) What is gross profit under each method?
(d) Which method results in a larger amount reported for assets on the balance sheet? Which results in a larger amount reported for stockholders' equity on the balance sheet?

Understand the principles of inventory costing and recognition, including the differences between FOB shipping point and FOB destination.

Identify and explain the implications of different inventory turnover ratios.

Understand the effects of using different inventory cost formulas like FIFO, average cost, and specific identification under varying market conditions.

Recognize the factors that influence the inclusion of goods in the physical count of inventory.

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Definitions:

Rent

A periodic fee paid for the use of property or land.

Opportunity Cost

The foregone benefit that would have been derived from an option not chosen.

Unlimited Resources

A hypothetical scenario in which there is an infinite supply of resources, making scarcity and allocation concerns non-existent.

Favorite Tv Show

The television program a person enjoys the most or has a strong preference for over others.