Question

Zippy Shoe Co. uses a periodic inventory system. Zippy purchased 430 pairs of shoes at $69 each in June, 990 pairs in August at $71 each, and 620 pairs in December at $74 each. Zippy sold 1,895 pairs of shoes during the year.

Required:

Calculate the company's ending inventory and cost of goods sold using the each of following inventory costing methods.

1. FIFO
2. LIFO
3. Weighted Average

Answer 1

a. Under FIFO Method:

closing stock calculation

the company has purchased total 2040 pairs of shoes during the year i.e.(430+990+620).company has sold 1985 Pairs of shoes .the closing stock of units is 55 (2040-1985)

Most recent purchases stock value in December = 55 units x $74 per unit

closing stock value under FIFO Method= $4070

cost of goods sold:

value of goods purchased in June (430 units x $69 per unit) = $29670

value of goods purchased in August (990 units x $71 per unit) = $70290

value of goods purchased in December (620 units x $74 per unit) = $45880

total value of goods purchased = $145840

less value of cost of closing stock = $4070

cost of goods sold under FIFO Method = $141770

b. Under LIFO Method:

closing stock calculation

the company has purchased total 2040 pairs of shoes during the year i.e.(430+990+620).company has sold 1985 Pairs of shoes .the closing stock of units is 55 (2040-1985)

Most last purchases value in June =(55 units x $69 Per unit)  

closing stock value under LIFO Method= $3795

cost of goods sold:

value of goods purchased in June (430 units x $69 per unit) = $29670

value of goods purchased in August (990 units x $71 per unit) = $70290

value of goods purchased in December (620 units x $74 per unit) = $45880

total value of goods purchased = $145840

less value of cost of closing stock as per LIFO Method = $3795

cost of goods sold under LIFO Method = $142045

a. Under weighted Average  Method:

closing stock calculation

the company has purchased total 2040 pairs of shoes during the year i.e.(430+990+620).company has sold 1985 Pairs of shoes .the closing stock of units is 55 (2040-1985)

value of goods purchased in June (430 units x $69 per unit) = $29670

value of goods purchased in August (990 units x $71 per unit) = $70290

value of goods purchased in December (620 units x $74 per unit) = $45880

total value of goods purchased = $145840

Total number of Units(430+990+620) =2040

weighted Average cost per unit

(total value of goods purchased/total number of Units) = $71.49 Per unit

value of closing stock ( 55 units x $ 71.49 Per unit) =3931.95

cost of goods sold:

value of goods purchased in June (430 units x $69 per unit) = $29670

value of goods purchased in August (990 units x $71 per unit) = $70290

value of goods purchased in December (620 units x $74 per unit) = $45880

total value of goods purchased = $145840

less value of cost of closing stock as per Weighted Average Method = $3931.95

cost of goods sold under Weighted Average Method = $141908.05