Question

Paddington Gifts made purchases of a particular product in the current year as follows: Jan. 1 Beginning inventory 170 units @ $ 5.30 = $ 901 Mar. 7 Purchased 430 units @ $ 4.90 = 2,107 July 28 Purchased 1,200 units @ $ 4.30 = 5,160 Oct. 3 Purchased 730 units @ $ 3.70 = 2,701 Totals 2,530 units $ 10,869

Required:

1. The business uses a periodic inventory system. Ending inventory consists of 110 units. Calculate the costs to be assigned to the ending inventory and to goods sold under: (Round intermediate calculations and final answers to 2 decimal places for "Weighted average cost".)

2. Which method provides the lower profit?

Weighted-average cost or FIFO

Answer 1

Soluiton: 1
	FIFO Method - Periodical
			COST OF GOODS AVAILABLE FOR SALE	COST OF GOODS SOLD	ENDING INVENTORY
	Date	Particulars	No. of Units	Cost Per unit	Total	No. of Units	Cost Per unit	Cost of Goods Sold	No. of Units	Cost Per unit	Ending invetory
	Jan, 01	Beginning inventory	170	$                       5.30	$901	170	$               5.30	$901
	Mr, 07	Purchases	430	$                       4.90	$2,107	430	$               4.90	$2,107
	July, 28	Purchases	1200	$                       4.30	$5,160	1200	$               4.30	$5,160
	Oct, 03	Purchases	730	$                       3.70	$2,701	620	$               3.70	$2,294	110	$           3.70	$407
	January, 31	Total / Ending Balance	2,530		$10,869	2,420		$10,462	110		$407
	Weighted Average Periodical - Periodical
			COST OF GOODS AVAILABLE FOR SALE	COST OF GOODS SOLD	ENDING INVENTORY
	Date	Particulars	No. of Units	Cost Per unit	Total	No. of Units	Cost Per unit	Cost of Goods Sold	No. of Units	Cost Per unit	Ending invetory
	Jan, 01	Beginning inventory	170	$                       5.30	$901	170	$               5.30	$901
	Mr, 07	Purchases	430	$                       4.90	$2,107	430	$               4.90	$2,107
	July, 28	Purchases	1200	$                       4.30	$5,160	1200	$               4.30	$5,160
	Oct, 03	Purchases	730	$                       3.70	$2,701	620	$               3.70	$2,294
	January, 31	Total / Ending Balance	2,530	$4.30	$10,869	2,420	$4.30	$10,396	110	$4.30	$473
Soluiton: 2
	Cost of Goods Sold as per FIFO method is higher than Weighted Cost so it means FIFO method have the lower profit
	Answer = FIFO