Question

Following is the information for the PHL Company for 2019:
Inventory on January 1, 2019 8,000 units x $6 $48,000
The company sold 10,000 units for $240,000 during the year 2019. The total purchases were
12,000 units @ $8 each and the total operating expenses were $25,000 during this period. A
periodic method is used.
Required:
a) Determine the cost of goods sold and the ending inventory on December 31 using
the FIFO method.

b) Determine the COGS and inventory balance on December 31, 2019 under the
average costing method.

c) Using specific identification, calculate value of ending inventory if the remaining
units consisted of 5,000 from the beginning inventory and 5,000 from the purchases
during the year.

Answer 1

Requirement:A

	FIFO
Cost of Goods Sold	$          64,000
Ending Inventory	$          80,000

Working:

Particulars	Units	Unit Cost	Cost
Beginning Inventory	8,000	$                                   6	$            48,000
Purchases	12,000	$                                   8	$            96,000
Total Goods available for sale [A]	20,000		$         144,000
Total Cost of goods sold [B]	10,000	(8000*6)+(2000*8)	$            64,000
Ending Inventory [A-B]	10,000		$            80,000

Requirement:B

	Average Cost	Calculation
Cost of Goods Sold	$          72,000	144000/20000*10000
Ending Inventory	$          72,000	144000/20000*10000

Requirement:C

	Specific Identification	Calculation
Ending Inventory	$          70,000	(5000*6)+(5000*8)