Question

During June, the following changes in inventory item A took place:

   June 1   Balance   800 units @ $20

June 8   Sold       600 units @ $50

June 10   Purchased   800 units @ $21

June  14   Sold       700 units @ $50

June 24   Purchased   600 units @ $22

          

Instructions

What is the cost of goods sold and the ending inventory for item A under the following methods? (Show calculations.)

A. Periodic

(a)   FIFO

(b)   LIFO

(c) Average cost

B. Perpetual

(a)   FIFO

(b)   LIFO

(c) Average cost

Answer 1

A.

	FIFO	LIFO	Average Cost
Cost of goods sold $	26500	27900	27182
Ending inventory $	19500	18100	18818

Working:

	Units	Unit Cost $	Total Cost $
Beginning balance	800	20	16000
Add: Purchases
Jun. 10	800	21	16800
Jun. 24	600	22	13200
Total purchases	1400		30000
Goods available for sale	2200		46000
Ending inventory: FIFO
Jun. 24 purchases	600	22	13200
Jun. 10 purchases	300	21	6300
Total ending inventory-FIFO	900		19500
Cost of goods sold-FIFO	1300		26500
Ending inventory: LIFO
Beginning balance	800	20	16000
Jun. 10 purchases	100	21	2100
Total ending inventory-LIFO	900		18100
Cost of goods sold-LIFO	1300		27900

Average cost:

Ending inventory-Average cost = 900 x $46000/2200 = $18818

Cost of goods sold-Average cost = 1300 x $46000/2200 = $27182

Note: Average cost answers are rounded off to the nearest whole dollar.

B.

	FIFO	LIFO	Average Cost
Cost of goods sold $	26500	26700	26560
Ending inventory $	19500	19300	19440

Working:

FIFO
	Purchased			Sold			Balance in Inventory
Date	Units	Unit cost	Total $	Units	Unit cost	Total $	Units	Unit cost	Total $
Jun. 1 Balance							800	20	16000
Jun. 8				600	20	12000	200	20	4000
Jun. 10	800	21	16800				200	20	4000
							800	21	16800
Jun. 14				200	20	4000
				500	21	10500	300	21	6300
Jun. 24	600	22	13200				300	21	6300
							600	22	13200
Total	1400		30000	1300		26500	900		19500
LIFO
	Purchased			Sold			Balance in Inventory
Date	Units	Unit cost	Total $	Units	Unit cost	Total $	Units	Unit cost	Total $
Jun. 1 Balance							800	20	16000
Jun. 8				600	20	12000	200	20	4000
Jun. 10	800	21	16800				200	20	4000
							800	21	16800
Jun. 14				700	21	14700	200	20	4000
							100	21	2100
Jun. 24	600	22	13200				200	20	4000
							100	21	2100
							600	22	13200
Total	1400		30000	1300		26700	900		19300
Average Cost
	Purchased			Sold			Balance in Inventory
Date	Units	Unit cost	Total $	Units	Unit cost	Total $	Units	Unit cost	Total $
Jun. 1 Balance							800	20	16000
Jun. 8				600	20	12000	200	20	4000
Jun. 10	800	21	16800				1000	20.80	20800
Jun. 14				700	20.80	14560	300	20.80	6240
Jun. 24	600	22	13200				900	21.60	19440
Total	1400		30000	1300		26560	900		19440