Question

a company purchases inventory during the year in four batches, with unit and price amount shown below:

Batch 1 - 9,500 units @ $2.10 per unit
Batch 2 - 4,300 units @ $2.08 per unit
Batch 3 - 3,600 units @ $2.04 per unit
Batch 4 - 7,200 units @ $2.01 per unit

10,800 units were sold after Batch 2 was purchased, while 3,400 units were sold after Batch 3 was purchased.

1. calculate cost of goods sold and ending inventory under the LIFO method, using the perpetual inventory system.

2. Calculate cost of goods sold and ending inventory under the lifo method, using the periodic inventory system

Answer 1

1. Stock ledger

	Available for sale			Cost of goods sold			Ending inventory
Date	Description	Units	Unit cost	Units	Unit cost	Total cost	Units	Unit cost	Total cost
1	Purchase	9,500	2.10				9,500	2.10	19,950
2	Purchase	4,300	2.08				4,300	2.08	8,944
				4,300	2.08	8,944
				6,500	2.10	13,650	3,000	2.10	6,300
3	Purchase	3,600	2.04				3,000	2.10	6,300
							3,600	2.04	7,344
				3,400	2.04	6,936	3,000	2.10	6,300
							200	2.04	408
4	Purchase	7,200	2.01				3,000	2.10	6,300
							200	2.04	408
							7,200	2.01	14,472

Cost of goods sold = 8,944 + 13,650 + 6,936

= $29,530

Ending inventory = 6,300 + 408 + 14,472

= $21,180

2.

Batch 1 - 9,500 units @ $2.10 per unit = 19,950
Batch 2 - 4,300 units @ $2.08 per unit = 8,944
Batch 3 - 3,600 units @ $2.04 per unit = 7,344
Batch 4 - 7,200 units @ $2.01 per unit = 14,472

Cost of goods available for sale = 19,950 + 8,944 + 7,344 + 14,472

= $50,710

Ending inventory

Batch 1 = 9,500 x 2.10 = $19,950

Batch 2 = 900 x 2.08 = $1,872

Hence, ending inventory = $19,950 + 1,872

= $21,822

Cost of goods sold = Cost of goods available for sale - Ending inventory

= 50,710 - 21,822

= $28,888