Accounting homework help...?

Question

I am computing the cost of Ending Inventory by using the LIFO and FIFO methods. Will there be any difference in my cost of ending inventory between periodic and prepetual systems?

Answer 1

Yes, there will be a difference. Someone else asked almost the same question, using LIFO. Take a look and see if it helps. The question is at the 1st link below.

The 2nd and 3rd links are from 2 chapters which explain the subject very simply, and with illustrations.

Answer 2

FIFO and LIFO will NOT give you the same cost of ending inventory.

Under fifo the oldest item is sold first and usually costs less than the newest item in inventory. This decreases cost of goods sold and results in a higher gross profit.

Under lifo, the newest item is sold first and usually costs more than the oldest item in inventory. This will increase the cost of goods sold and results in a lower gross profit.

Each lf these, of course have an affect on net income.

Fifo perpetual and fifo perodic will usually result in the same ending inventory.

Lifo perpetual and lifo perodic will not give the same results.

The best way to recognize these differences, is to work through a number of different problems and see the results yourself.

I hope this helps.

Answer 3

FIFO periodic and FIFO perpetual will usually give you the same answer.

But LIFO periodic and LIFO perpetual will usually give you different answers, and often different from either FIFO method too.

Answer 4

Yes, there can be a difference in inventory.