Question

The Concord Company counted physically their beginning balance on January 02, 2020 and subsequent inventory purchases made by the company during the month of January 2020 are given below:

Date Description Units   Rate

Jan. 02 Beginning Inventory 300 $10

Jan. 11 Purchased 600 12   

Jan 23 Purchased 700 11

The company sold 1,300 units during the month of January 2020.

Instructions: The company uses periodic inventory system. Compute the cost of goods sold and ending inventory on January 31, 2020 using the following inventory costing methods:

a)    First in, first out (FIFO) method.

b) Weighted Average cost method.

Answer 1

a,Computation of Cost of goods sold & cost of the ending inventory using FIFO cost method is as follows: (Periodic)

Date	Number of Units Purchased	Cost per Unit	Purchase Cost	Number of Units Sold	Cost per Unit	Cost of Goods Sold	Number of Units Balance	Cost per Unit	Inventory Balance
Jan 02							300	$      10.00	$          3,000.00
Jan 11	600	$ 12.00	$       7,200.00				300	$      10.00	$          3,000.00
							600	$      12.00	$          7,200.00
Jan 23	700	$ 11.00	$       7,700.00				300	$      10.00	$          3,000.00
							600	$      12.00	$          7,200.00
							700	$      11.00	$          7,700.00
Jan				300	$ 10.00	$       3,000.0	400	$      11.00	$          4,400.00
				600	$ 12.00	$       7,200.0
				300	$ 11.00	$       3,300.0
Total	1300		$    14,900.00	1200		$    13,500.0	400		$         4,400.00

As per above table,

Cost of goods sold is $ 13,500

Cost of ending Inventory is $ 4,400

b.Computation of Cost of goods sold & cost of the ending inventory using weighted-average cost method is as follows: (Periodic)

Date	Number of Units Purchased	Cost per Unit	Purchase Cost	Number of Units Sold	Cost per Unit	Cost of Goods Sold	Number of Units Balance	Cost per Unit	Inventory Balance
Jan 02							300	$          10.00	$   3,000.00
Jan 11	600	$   12.00	$   7,200.00				300	$          10.00	$   3,000.00
							600	$          12.00	$   7,200.00
Jan 23	700	$   11.00	$   7,700.00				300	$          10.00	$   3,000.00
							600	$          12.00	$   7,200.00
							700	$          11.00	$   7,700.00
							1600	$     11.1875	$17,900.00
Jan				1200	$ 11.1875	$   13,425.00	400	$          11.19	$   4,475.00
Total	1300		$ 14,900.00	1200		$     13,425.0	400		$   4,475.00

As per above table,

Cost of goods sold is $ 13,425

Cost of ending Inventory is $ 4,475

Alternative for Weighted average cost method:

Calculation of  Cost of Goods Sold is as follows:

Cost of Goods Sold = Sales units * Weighted average unit cost

= 1200 * $ 11.1875

= $ 13,425

Calculation of Cost of Ending Inventory is as follows:

Cost of Ending Inventory = Ending inventory units * Weighted average unit cost

= 400 * $ 11.1875

= $ 4,475

Working note:

Calculation of weighted average unit cost is as follows:

Weighted average unit cost = (Cost of beginning inventory + cost of purchases) / ( Beginning inventory + Purchases )

= $ 17,900 / 1600

= $ 11.1875 per unit