In: Accounting
Ferris Company began January with 4,000 units of its principal
product. The cost of each unit is $6. Merchandise transactions for
the month of January are as follows:
Purchases | |||||||||
Date of Purchase | Units | Unit Cost* | Total Cost | ||||||
Jan. 10 | 3,000 | $ | 7 | $ | 21,000 | ||||
Jan. 18 | 4,000 | 8 | 32,000 | ||||||
Totals | 7,000 | 53,000 | |||||||
* Includes purchase price and cost of freight.
Sales | ||
Date of Sale | Units | |
Jan. 5 | 2,000 | |
Jan. 12 | 1,000 | |
Jan. 20 | 3,000 | |
Total | 6,000 | |
5,000 units were on hand at the end of the month.
1. Calculate January's ending inventory and
cost of goods sold for the month using FIFO, periodic system.
2. Calculate January's ending inventory and cost
of goods sold for the month using LIFO, periodic system.
3. Calculate January's ending inventory and cost
of goods sold for the month using FIFO, perpetual system.
4. Calculate January's ending inventory and cost
of goods sold for the month using Average cost, periodic
system.
5. Calculate January's ending inventory and cost
of goods sold for the month using Average cost, perpetual
system.
FIFO: Under the FIFO method, it is assumed that the goods
purchased first are the goods sold first. So the ending inventory
would represent the goods purchased later in point of time.
LIFO: Under the LIFO method, it is assumed that the goods purchased
last are the goods sold first. So the ending inventory would
represent the goods which are purchased first in point of
time.
Average cost: Under the average cost method, average cost per unit
is found for units available for sale and the average cost arrived
is used to calculate ending inventory and cost of goods sold.