Question

Periodic Inventory by Three Methods; Cost of Merchandise Sold The units of an item available for sale during the year were as follows: Jan. 1 Inventory 50 units @ $124 Mar. 10 Purchase 70 units @ $132 Aug. 30 Purchase 20 units @ $138 Dec. 12 Purchase 60 units @ $140 There are 80 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost and the cost of merchandise sold by three methods. Round interim calculations to one decimal and final answers to the nearest whole dollar.

Cost of Merchandise Inventory and Cost of Merchandise Sold

Inventory Method Merchandise Inventory Merchandise Sold First-in, first-out (FIFO) $

$ Last-in, first-out (LIFO) Weighted average cost

Answer 1

Cost of goods available for sale:

Date	Units	Unit Cost	Total Cost
Jan-01	50	124	6,200
Mar-10	70	132	9,240
Aug-30	20	138	2,760
Dec-12	60	140	8,400
Total	200		26,600

FIFO:

As per FIFO method, ending inventory will be calculated as under:

Date	Units	Unit Cost	Total Cost
Aug-30	20	138	2,760
Dec-12	60	140	8,400
Total	80		11,160

Cost of ending inventory = $11,160

Cost of goods sold = Cost of goods available for sale - Cost of ending inventory

= 26,600-11,160

= $15,440

LIFO:

As per LIFO, ending inventory will be calculated as under:

Date	Units	Unit Cost	Total Cost
Jan-01	50	124	6,200
Mar-10	30	132	3,960
Total	80		10,160

Cost of ending inventory = $10,160

Cost of goods sold = Cost of goods available for sale - Cost of ending inventory

= 26,600-10,160

= $16,440

Weighted Average method

Weighted average cost per unit = Cost of goods available for sale / Number of units available for sale

= 26,600/200

= $133

Cost of ending inventory = Ending inventory x Weighted average cost per unit

= 80 x 133

= $10,640

Number of units sold = Number of units available for sale - Ending inventory units

= 200-80

= 120

Cost of goods sold = Number of units sold x Weighted average cost per unit

= 120 x 133

= $15,960