Question

In: Accounting

Periodic inventory by three methods; cost of goods sold


Periodic inventory by three methods; cost of goods sold

The units of an item available for sale during the year were as follows:

Jan. 1Inventory180units at $108
Mar. 10Purchase224units at $110
Aug. 30Purchase200units at $116
Dec. 12Purchase196units at $120

There are 208 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the ending inventory cost and the cost of goods sold by three methods.



Cost of Inventory and Cost of Goods Sold
Inventory MethodEnding InventoryCost of Goods Sold
First-in, first-out (FIFO)$$
Last-in, first-out (LIFO)

Weighted average cost


Solutions

Expert Solution

a. FIFO Method

Units Rate Amount
Sale from beginning inventory 180 $   108 $   19,440
Sale from March 10 purchase 224 $   110 $   24,640
Sale from August 30 purchase 188 $   116 $   21,808
Cost of goods sold 592 $   65,888
Units Rate Amount
Balance from Aug 30 purchase 12 $   116 $     1,392
Balance from Dec 12 purchase 196 $   120 $   23,520
Ending inventory 208 $   24,912

b. LIFO Method

Units Rate Amount
Sale from Dec 12 purchase 196 $   120 $   23,520
Sale from Aug 30 purchase 200 $   116 $   23,200
Sale from Mar 10 purchase 196 $   110 $   21,560
Cost of goods sold 592 $   68,280
Units Rate Amount
Balance from Mar 10 purchase 28 $   110 $     3,080
Balance from Beginning inventory 180 $   108 $   19,440
Ending inventory 208 $   22,520

c. Average cost method

Units Rate Amount
Beginning inventory 180 $   108 $   19,440
March 10 purchases 224 $   110 $   24,640
August 30 purchases 200 $   116 $   23,200
Dec 12 Purchase 196 $   120 $   23,520
Number and cost of goods available for sale 800 $   90,800
Number of units available for sale             800
Cost of goods available for sale $   90,800
Weighted average cost per unit ($90,800/800) $   113.50
Cost of goods sold = 592*$113.5
Cost of goods sold = $67,192
Ending inventory = 208*$113.5
Ending inventory = $23,608

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