Question

(Compute FIFO, LIFO, and Average-Cost) Pillsbury Company's record of transactions concerning part WA6 for the month of September was as follows.

		Purchases
September	1	(balance on hand)	300@	$12.00
	3		200@	$12.10
	12		300@	$12.25
	16		300@	$12.30
	22		500@	$12.30
	26		300@	$12.40

	Sales
September	4	400
	17	600
	27	300
	30	200

Instructions:

(a) Compute the inventory at September 30 on each of the following bases. Assume that perpetual inventory records are kept in units only. Carry unit cost to the nearest cent.

(1) First-in, first-out (FIFO).

(2)Last-in, Last-out (LIFO).

(3) Average cost.

(b) If the perpetual inventory record is kept in dollars, and costs are computed at the time of each withdrawal, what amount would be shown as ending inventory in (1),(2), and (3) above? Carry average unit costs to four decimal places.

Clearly Mark Your Answers

Answer 1

Ans. A	FIFO :
	Purchase				Cost of goods sold			Balance
	Date	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
	1-Sep							300	$12.00	$3,600.00
	3-Sep	200	$12.10	$2,420				300	$12.00	$3,600.00
								200	$12.10	$2,420
	4-Sep				300	$12.00	$3,600.00
					100	$12.10	$1,210	100	$12.10	$1,210
	12-Sep	300	12.25	3675				100	$12.10	$1,210
								300	12.25	3675
	16-Sep	300	12.30	3690				100	$12.10	$1,210
								300	12.25	3675
								300	12.30	3690
	17-Sep				100	$12.10	$1,210
					300	12.25	3675
					200	12.30	2460	100	12.30	1230
	22-Sep	500	12.30	6150				100	12.30	1230
								500	12.30	6150
	26-Sep	300	12.40	3720				100	12.30	1230
								500	12.30	6150
								300	12.40	3720
	27-Sep				100	12.30	1230
					200	12.30	2460	300	12.30	3690
								300	12.40	3720
	30-Sep				200	12.30	2460	100	12.30	1230
								300	12.40	3720
	Total				Cost of goods sold		$18,305	Ending inventory		$4,950
	*In FIFO method the units that have purchased first are released the first one.
Ans. B	Perpetual LIFO:
	Purchase				Cost of goods sold			Balance
	Date	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
	1-Sep							300	$12.00	$3,600.00
	3-Sep	200	$12.10	$2,420				300	$12.00	$3,600.00
								200	$12.10	$2,420
	4-Sep				200	$12.10	$2,420
					200	$12.00	$2,400.00	100	$12.00	$1,200.00
	12-Sep	300	12.25	3675				100	$12.00	$1,200
								300	12.25	3675
	16-Sep	300	12.30	3690				100	$12.00	$1,200
								300	12.25	3675
								300	12.30	3690
	17-Sep				300	12.30	3690
					300	12.25	3675	100	$12.00	$1,200
	22-Sep	500	12.30	6150				100	12.00	1200
								500	12.30	6150
	26-Sep	300	12.40	3720				100	12.00	1200
								500	12.30	6150
								300	12.40	3720
	27-Sep				300	12.40	3720	100	12.00	1200
								500	12.30	6150
	30-Sep				200	12.30	2460	100	12.00	1200
								300	12.30	3690
	Total				Cost of goods sold		$18,365	Ending inventory		$4,890
	*In LIFO method the units that have purchased last, are released the first one.
Ans. C		Weighted Average
	Purchase				Cost of goods sold			Balance
	Date	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
	1-Sep							300	$12.00	$3,600.00
	3-Sep	200	$12.10	$2,420				500	$12.0400	$6,020.00
	4-Sep				400	$12.0400	$4,816	100	$12.0400	$1,204
	12-Sep	300	12.25	3675				400	$12.1975	$4,879
	16-Sep	300	12.30	3690				700	$12.2414	$8,569
	17-Sep				600	$12.2414	$7,345	100	$12.2414	$1,224
	22-Sep	500	12.30	6150				600	$12.2902	$7,374
	26-Sep	300	12.40	3720				900	$12.3268	$11,094
	27-Sep				300	$12.3268	$3,698	600	$12.3268	$7,396
	30-Sep				200	$12.3268	$2,465	400	$12.3268	$4,931
	Total				Cost of goods sold		$18,324	Ending inventory		$4,931
	*Weighted average rate is calculated by using the formula of (Total available balance / Total units available).