Question

Aircard Corporation tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period as if it uses a perpetual inventory system. The following are the transactions for the month of July.

		Units	Unit Cost
July 1	Beginning Inventory	2,200	$42
July 5	Sold	1,100
July 13	Purchased	6,200	46
July 17	Sold	3,200
July 25	Purchased	8,200	52
July 27	Sold	5,200

Calculate the cost of ending inventory and cost of goods sold assuming a perpetual inventory system is used in combination with (a) FIFO and (b) LIFO.

a)

	FIFO (Perpetual)UnitsCost per UnitTotalBeginning InventoryPurchasesJuly 13July 25Total PurchasesGoods Available for SaleCost of Goods SoldUnits from Beginning InventoryUnits from July 13 PurchaseUnits from July 25 PurchaseTotal Cost of Goods SoldEnding Inventory

b)
	LIFO (Perpetual)UnitsCost per UnitTotalBeginning InventoryPurchasesJuly 13July 25Total PurchasesGoods Available for SaleCost of Goods SoldUnits from Beginning InventoryUnits from July 13 PurchaseUnits from July 25 PurchaseTotal Cost of Goods SoldEnding Inventory

Answer 1

a) Computation of Closing inventory and Cost of Goods sold under FIFO method.

Particulars	Units	Cost per unit	Total( Units* Cost per unit)]
Beginning inventory	2200	$42	$92,400
Purchases
July 13	6200	$46	$285,200
July 25	8200	$52	$426,400
Total Purcahses	14400		$711,600
Goods Available for sale( Beginning inventory + Total purcahses)	16600		$804,000
Cost of Goods Sold
Units from Beginning Inventory	2200	$42	$92,400
Units from July 13 Purcahse	6200	$46	$285,200
Units from July 25 Purchase	1100	$52	$57,200
Total Cost of Goods sold	9500		$434,800
Ending inventory( Goods available for sale- Total Cost of Goods sold)	7100		$369,200

Under FIFO method it is assumed that first units arrived are sold first, thereby taking latest price in the Closing stock valuation

In the given problem, there are total 9500 units sold out of 16600 units. It is assumed that stock which comes first are dispatched for sale.

b) Computation of Closing inventory and Cost of Goods sold under LIFO method.

Particulars	Units	Cost per unit	Total( Units* Cost per unit)]
Beginning inventory	2200	$42	$92,400
Purchases
July 13	6200	$46	$285,200
July 25	8200	$52	$426,400
Total Purcahses	14400		$711,600
Goods Available for sale( Beginning inventory + Total purcahses)	16600		$804,000
Cost of Goods Sold
Units from Beginning Inventory	1100	$42	$46,200
Units from July 13 Purcahse	3200	$46	$147,200
Units from July 25 Purchase	5200	$52	$270,400
Total Cost of Goods sold	9500		$463,800
Ending inventory( Goods available for sale- Total Cost of Goods sold)	7100		$340,200

Under FIFO method it is assumed that latest units arrived are sold first, thereby taking old price in the Closing stock valuation

In july 5th 1100 units are sold from 2200 available units

On july 17th sales , 3200 units are dispatched from July 13th lot since they are the latest stock.

On july 27th sales , 5200 units are dispatched from July 25th lot since they are the latest stock.