Question

Mira’s Book distributes books to retail stores and extends credit terms of 2/15 n/30 to all of its customers. At the end of May, Mira’s inventory consisted of 100 books purchased for @ of $18 total of $1,800. During June, the following merchandising transactions occurred.And they are following periodic inventory system.

June 1 Purchased 32 books on account for @ of $50 total of $1,600 from Bondhu Publishers, FOB destination, terms 2/4, n/30. The appropriate party also made a cash payment of $50 for the freight on this date.

June 3 Sold 20 books on account to Rainbow traders for $2,500

June 6 Received $100 credit for 2 books returned to Bondhu Publishers.

June 9 Paid Bondhu Publishers in full,

June15 Received payment in full from Rainbow traders.

June17 Sold 40 books on account to Ratan Books for $1,800.

June 20 Purchased 45 books on account for @$40 total of $1,800 from Madina Publishers, FOB destination, terms 2/5, n/30. The appropriate party also made a cash payment of $60 for the freight on this date.

June24 Received payment in full from Ratan Books.

June 26 Paid Madina Publishers in full.

June 28 Sold 10 books on account to Titu Bookstore for $1,600.

June30 Granted Titu Bookstore $320 credit for 2 books returned

Instructions

Calculate the cost of goods sold and ending inventory balance for the month of June By using both FIFO and LIFO.

Answer 1

Units in ending inventory = 100+32-20-2-40+45-10+2 = 107 books

	Cost of Goods Available for Sale
Date	Quantity	Unit Cost	Amount
Beg Bal	100	$    18.00	$         1,800
Purchases
Jun-01	32	$    50.00	$         1,600
Jun-06	-2	$    50.00	$           -100
Jun-20	45	$    40.00	$         1,800
Total	175		$         5,100

No Purchase discount is availed
Cost of Goods Sold = Beginning Inventory + Purchases - Purchase Return - Ending Inventory

FIFO
Ending Inventory = 45 x $40 + 30 x $50 +32 x $18 = $3876
Cost of Goods Sold = $1800 + 3400 - 100 - 3876 = $1224

LIFO
Ending Inventory = 100 x $18 + 7 x $50 = $2150
Cost of Goods Sold = $1800 + 3400 - 100 - 2150 = $2950

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