Question

Metlock, Inc. had a beginning inventory on January 1 of 135 units of Product 4-18-15 at a cost of $21 per unit. During the year, the following purchases were made. Mar. 15 360 units at $24 Sept. 4 315 units at $27 July 20 225 units at $25 Dec. 2 90 units at $30 900 units were sold. Metlock, Inc. uses a periodic inventory system.

Determine the cost of goods available for sale. The cost of goods available for sale $

Calculate average cost per unit. (Round answer to 2 decimal places, e.g. 2.23.) Average cost per unit $

Determine (1) the ending inventory, and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost). Prove the accuracy of the cost of goods sold under the FIFO and LIFO methods. (Round answers to 0 decimal places, e.g. 1,250.) FIFO LIFO AVERAGE-COST The ending inventory $ $ $ The cost of goods sold $ $ $

Which cost flow method results in (1) the highest inventory amount for the balance sheet, and (2) the highest cost of goods sold for the income statement? (1) FIFOLIFOAverage-cost results in the highest inventory amount, $ . (2) FIFOLIFOAverage-cost produces the highest cost of goods sold, $ .

Answer 1

1	The cost of goods available for sale	$28,305
2	Average cost per unit	$25.16
3		FIFO	LIFO	Average cost
	Ending Inventory	$6,345	$4,995	$5,661
	Cost of Goods Sold	$21,960	$23,310	$22,644
4	The highest inventory amount for the balance sheet	FIFO
	The highest cost of goods sold for the income statement	LIFO
	Working
	FIFO
	Units	Unit Cost
	135	$27	$3,645
	90	$30	$2,700
	Ending Inventory		$6,345
	COGS = Beginning inventory + purchases - ending inventory
	=	$2,835 + $25,470 - $6,345
	=	$21,960
	LIFO
	Units	Unit Cost
	135	$21	$2,835
	90	$24	$2,160
	Ending Inventory		$4,995
	COGS = Beginning inventory + purchases - ending inventory
	=	$2,835 + $25,470 - $4,955
	=	$23,310
	Average cost
	Units	Unit Cost
	135	$21	$2,835
	360	$24	$8,640
	225	$25	$5,625
	315	$27	$8,505
	90	$30	$2,700
	1,125		$28,305
	Average cost per unit ($28,305/1,125)		$25.16
	Ending Inventory = 225 x $25.16	$5,661
	COGS = Beginning inventory + purchases - ending inventory
	=	$2,835 + $25,470 - $5,661
	=	$22,644