Question

Periodic Inventory by Three Methods; Cost of Merchandise Sold The units of an item available for sale during the year were as follows: Jan. 1 Inventory 50 units @ $90 Mar. 10 Purchase 50 units @ $100 Aug. 30 Purchase 10 units @ $104 Dec. 12 Purchase 90 units @ $110 There are 60 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost and the cost of merchandise sold by three methods. Round interim calculations to one decimal and final answers to the nearest whole dollar. Cost of Merchandise Inventory and Cost of Merchandise Sold Inventory Method Merchandise Inventory Merchandise Sold First-in, first-out (FIFO) $ $ Last-in, first-out (LIFO) Weighted average cost

Answer 1

Ans.	*Available for sale:
	Date	Units	Rate	Total
	1-Jan	50	$90	$4,500
	10-Mar	50	$100	$5,000
	30-Aug	10	$104	$1,040
	12-Dec	90	$110	$9,900
	Total available for sale	200		$20,440
	No. of units sold = Total units available - Physical or ending inventory units
		200 - 60   =    140 units
Periodic FIFO:
	Date	Units	Rate	Total
	1-Jan	50	$90	$4,500
	10-Mar	50	$100	$5,000
	30-Aug	10	$104	$1,040
	12-Dec	30	$110	$3,300
	Cost of goods sold	140		$13,840
	*In FIFO inventory system, the units that are purchased first, are released first.
	Cost of ending inventory =   Total cost of goods available for sale - Cost of goods sold
		20440 - 13840
		$6,600
Periodic LIFO:
	Date	Units	Rate	Total
	12-Dec	90	$110	$9,900
	30-Aug	10	$104	$1,040
	10-Mar	40	$100	$4,000
	Cost of goods sold	140		$14,940
	Cost of ending inventory = Total cost of goods available for sale - Cost of supplies used
		20440 - 14940
		$5,500
Periodic Weighted Average:
	Average cost per unit = Total cost of goods available for sale / Total units available
		20440 / 200
		$102.2
	Cost of goods sold   =   No. of units sold * Average cost per unit
		140 * 102.2
		$14,308
	Cost of ending inventory = Total cost of goods available for sale - Cost of supplies used
		20440 - 14308
		$6132