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LEFO Company uses the periodic inventory system to account for inventories. Information related to LEFO Company's...

LEFO Company uses the periodic inventory system to account for inventories. Information related to LEFO Company's inventory at March 31 is given below:

Date - Description - Units - Unit Cost

March 1 - Beg. Inventory - 10 units - $100

March 8 - Purchase - 10 units - $110

March 17 - Purchase - 10 units - $120

March 24 - Purchase - 10 units - $125

March 30 - Purchase - 10 units - $130

a. Calculate the value of ending inventory using the FIFO cost assumption if 15 units remain on hand at March 31. Calculate COGS.

b. Calculate the value of ending inventory using the LIFO cost assumption if 15 units remain on hand at March 31. Calculate COGS.

c. Calculate the value of ending inventory using the weighted-average cost cost assumption if 15 units remain on hand at March 31. Calculate COGS.

Solutions

Expert Solution

Date Description Units Unit cost Total cost
March 1 Beg. Inventory 10 100 1000
March 8 Purchase 10 110 1100
March 17 Purchase 10 120 1200
March 24 Purchase 10 125 1250
March 30 Purchase 10 130 1300
Goods available for sale 50 5850
a. FIFO method : In this method those goods are sold first which are purchased first and the ending inventory is from the latest purchases.
Ending inventory = ( 10 * 130 ) + ( 5 * 125 ) 1925
COGS = Cost of goods available for sale - Ending inventory = 5850 - 1925 3925
b. LIFO method : In this method those goods are sold first which are purchased last ( i.e. recently ) and the ending inventory is from beginning inventory and earlier purchases.
Ending inventory = ( 10 * 100 ) + ( 5 * 110 ) 1550
COGS = Cost of goods available for sale - Ending inventory = 5850 - 1550 4300
c. Weighted average cost method :
Weighted average cost per unit = Cost of goods available for sale / Units of goods available for sale = 5850 / 50 117
Ending inventory = Ending inventory units * Weighted average cost per unit = 15 * 117 1755

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